SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 21, 1999
Date of Report
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 N. Hastings Way, Eau Clair, WI 54702-0188
(Address of Principal Office)
(715) 831-0280
(Registrant's Telephone Number)
<PAGE>
Item 5. OTHER EVENTS
The consolidated and pro forma financial statements of RMED
International, Inc. and Jettar, Ltd. reflecting pooled operations of
RMED International, Inc. and Jettar, Ltd., which was acquired by RMED
International, Inc. on October 30, 1998 are filed as exhibits hereto and
supplement the 8-K Report filed by RMED International, Inc. on December
3, 1998:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 99.1
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Public Accountants'
Balance Sheet as of September 30, 1998 (unaudited) and
December 31, 1997
Statement of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited); and for
the year ended December 31, 1997 and the nine months
ended December 31, 1996
Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited); and for
the year ended December 31, 1997 and the nine
months ended December 31, 1996
Statement of Changes in Stockholders' Equity from
April 1, 1996 (inception) to September 30, 1998
Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma combined condensed balance sheet of RMED
International, Inc. and Jettar, Ltd.
SIGNATURES
Pursuant to the requirements of the Securities and 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: January 21, 1999 By: /s/ Brenda Schenk
-------------------------------
Brenda Schenk
President and Principal
Financial Officer
Exhibit 99.1
JETTAR, LTD.
Financial Statements
TABLE OF CONTENTS
PAGE
----
Report of Independent Public Accountants' F-1
Balance Sheet as of September 30, 1998 (unaudited) and
December 31, 1997 F-2
Statement of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited); and for
the year ended December 31, 1997 and the nine months
ended December 31, 1996 F-3
Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited); and for
the year ended December 31, 1997 and the nine
months ended December 31, 1996 F-4
Statement of Changes in Stockholders' Equity from
April 1, 1996 (inception) to September 30, 1998 F-5
Notes to Financial Statements F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS'
September 26, 1998 (except as to Note J,
which is as of November 23, 1998)
To the Board of Directors:
RMED International, Inc.
Eau Claire, Wisconsin
We have audited the accompanying balance sheet of Jettar, Ltd. (a Wisconsin
corporation) as of December 31, 1997, and the related statements of operations,
cash flows and changes in stockholders' equity for the year then ended and for
the nine months from April 1, 1996 (inception) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jettar, Ltd. as of December 31,
1997 and the results of its operations and its cash flows for the year then
ended and for the nine months ended December 31, 1996 in conformity with
generally accepted accounting principles.
OATLEY BYSTROM & HANSEN
Greenwood Village, Colorado
F-1
<PAGE>
JETTAR, LTD.
Balance Sheet
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 31,577 $ 793
Accounts receivable, net 1,112,359 820,120
Inventory 1,250,015 1,015,342
Prepaids expenses and other 177,467 217,750
----------- -----------
Total current assets 2,571,418 2,054,005
----------- -----------
PROPERTY AND EQUIPMENT 2,233,076 2,430,519
----------- -----------
OTHER ASSETS
Deferred officer compensation 19,390 106,646
Security deposit 40,000 40,000
----------- -----------
59,390 146,646
----------- -----------
$ 4,863,884 $ 4,631,170
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 170,429 $ 286,236
Current maturities of long term debt 517,600 1,246,030
Accounts payable 1,230,465 908,264
Accrued expenses 323,878 137,376
----------- -----------
Total current liabilities 2,242,372 2,577,906
----------- -----------
LONG TERM DEBT
Bank line-of credit 2,135,000 1,710,000
Capital lease obligations, less current
maturities 20,384 26,298
----------- -----------
Total liabilities 4,397,756 4,314,204
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 20,000 shares
authorized; 10,100 shares issued; 9,580 and
9,680 outstanding, respectively 10,100 10,100
Additional paid-in capital 2,514,900 2,514,900
Accumulated deficit (1,936,172) (2,096,034)
----------- -----------
588,828 428,966
Less treasury stock at cost; 520 and 420 shares,
respectively (122,700) (112,000)
----------- -----------
Total stockholders' equity 466,128 316,966
----------- -----------
$ 4,863,884 $ 4,631,170
=========== ===========
See accompanying notes.
F-2
<PAGE>
JETTAR, LTD.
Statement of Operations
<TABLE>
<CAPTION>
Nine Months Nine Months Nine Months
Ended Ended Year Ended Ended
September 30, September 30, December 31, December 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 12,493,982 $ 4,056,467 $ 7,434,762 $ --
COST OF SALES 7,624,190 2,991,460 5,142,831 --
------------ ----------- ----------- ---------
GROSS PROFIT 4,869,792 1,065,007 2,291,931 --
------------ ----------- ----------- ---------
OPERATING EXPENSES
Sales and marketing 3,911,433 1,455,549 3,024,087 79,996
General and administrative 592,224 476,249 701,972 346,716
------------ ----------- ----------- ---------
4,503,657 1,931,798 3,726,059 426,712
------------ ----------- ----------- ---------
OPERATING INCOME (LOSS) 366,135 (866,791) (1,434,128) (426,712)
------------ ----------- ----------- ---------
OTHER INCOME (EXPENSE)
Interest expense (206,273) (185,383) (245,663) (544)
Interest income and other -- 356 2,474 17,005
------------ ----------- ----------- ---------
(206,273) (185,027) (243,189) 16,461
------------ ----------- ----------- ---------
NET INCOME (LOSS) $ 159,862 $(1,051,818) $(1,677,317) $(410,251)
============ =========== =========== =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
JETTAR, LTD.
Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Nine Months Nine Months
Ended Ended Year Ended Ended
September 30, September 30, December 31, December 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 159,862 $(1,051,818) $(1,677,317) $ (410,251)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation 199,751 197,564 264,029 --
Amortization 5,681 6,391 8,521 --
Amortization of deferred compensation 87,256 39,993 53,324 39,992
Stock issued officer for legal services -- -- -- 35,000
Changes in operating assets and liabilities:
Accounts receivable (292,239) (764,428) (820,120) --
Inventory (234,673) (700,268) (822,779) (192,563)
Prepaids expenses and other 40,283 (116,281) (99,050) (118,700)
Accounts payable 322,201 (1,083,176) (1,219,571) 2,127,835
Accrued expenses 186,502 58,507 120,524 6,890
--------- ----------- ----------- -----------
NET CASH FROM (USED FOR) OPERATIONS 474,624 (3,413,516) (4,192,439) 1,488,203
--------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (7,989) (139,713) (143,140) (2,517,322)
Security deposit -- (40,000) (40,000) --
--------- ----------- ----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (7,989) (179,713) (183,140) (2,517,322)
--------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (repayments) - bank line-of credit (304,000) 2,368,000 2,948,000 --
Net increase (decrease) in bank overdraft (115,807) 68,797 286,236 --
Principal payments on capital lease obligations (5,344) (6,210) (8,279) --
Proceeds from sale of stock -- 1,025,000 1,025,000 1,275,000
Payments to acquire treasury stock (10,700) (112,000) (112,000) --
Distributions to stockholders -- (8,466) (8,466) --
--------- ----------- ----------- -----------
NET CASH FROM FINANCING ACTIVITIES (435,851) 3,335,121 4,130,491 1,275,000
--------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 30,784 (258,108) (245,088) 245,881
CASH - BEGINNING OF PERIOD 793 245,881 245,881 --
--------- ----------- ----------- -----------
CASH - END OF YEAR $ 31,577 $ (12,227) $ 793 $ 245,881
========= =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
JETTAR, LTD.
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Retained
---------------- Paid-in Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
------ ------ ------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
April 1, 1996 (inception) -- $ -- $ -- $ -- $ -- $ --
Issued for cash 5,100 5,100 1,269,900 -- -- 1,275,000
Issued for services 900 900 224,100 -- -- 225,000
Net loss -- -- -- (410,251) -- (410,251)
------ ------- ----------- ----------- ----------- -----------
December 31, 1996 6,000 6,000 1,494,000 (410,251) -- 1,089,749
Issued for cash 4,100 4,100 1,020,900 -- -- 1,025,000
Purchase 420 shares -- -- -- -- (112,000) (112,000)
Distributions -- -- -- (8,466) -- (8,466)
Net loss -- -- -- (1,677,317) -- (1,677,317)
------ ------- ----------- ----------- ----------- -----------
December 31, 1997 10,100 10,100 2,514,900 (2,096,034) (112,000) 316,966
Unaudited:
Purchase 100 shares -- -- -- -- (10,700) (10,700)
Net income -- -- -- 159,862 -- 159,862
------ ------- ----------- ----------- ----------- -----------
September 30, 1998 10,100 $10,100 $ 2,514,900 $(1,936,172) $ (122,700) $ 466,128
====== ======= =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
Note A - Business and Operations
Description of Business
Jettar, Ltd. (the "Company") was incorporated in Wisconsin on April 1, 1996.
Based in Eau Claire, Wisconsin, the Company is engaged in the manufacture of
disposable baby diapers for private label distributors and its own Bumpies(R)
and Rock-A-Bye(R) brands. The Company's private brand diapers are marketed
through independent commissioned brokers and sold to retail grocery chains in
the Midwest and Mid-Atlantic regions. On November 23, 1998, the Company merged
with RMED International, Inc. (see Note I).
Major Customer
Sales in 1997 to a single customer constituted approximately 13% of total sales.
The customer has several locations throughout the Midwest and each location
negotiates its purchases separately. At December 31, 1997 the receivable from
this customer was $294,500.
Major Suppliers
The Company purchased raw materials in 1997 from three vendors totaling
approximately $2,324,000 or 46% of total raw material purchases. Purchases from
each vendor ranged from 13% to 18%. As of December 31, 1997, outstanding
accounts payable to these vendors totaled approximately $346,917.
Note B - Summary of Significant Accounting Policies
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Accounts Receivable
Accounts receivable are written off when deemed uncollectible. An allowance for
doubtful accounts has not been provided since the amount of such allowance is
immaterial to the financial statements.
Inventory
Inventory is valued at the lower of cost or market. Cost is determined by use of
the first-in, first-out method. Inventories consist of the following:
December 31,
----------------------------
1997 1996
----------------------------
Raw materials $ 506,640 $192,563
Finished goods 508,702 --
---------- --------
$1,015,342 $192,563
========== ========
F-6
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the assets' estimated useful lives, which is
principally ten years. Upon sale or retirement the related cost and accumulated
depreciation of property is removed from the accounts. Amortization of leased
property under capital leases is provided using the straight-line method over
the term of lease. Maintenance and repair costs are expensed as incurred, and
renewals and improvements that extend the useful life of the assets are
capitalized.
As of December 31, 1997, property and equipment consists of the following:
Manufacturing and warehouse equipment $ 2,685,534
Office equipment 17,535
-----------
2,703,069
Accumulated depreciation and amortization (272,550)
-----------
$ 2,430,519
===========
Deferred Officer Compensation
Deferred officer compensation represents the estimated cost of stock issued
services and is amortized over the related vesting period.
Revenue Recognition
Sales are recognized when products are shipped. Sales generally are on an open
account basis, subject to credit limits that typically provide a two percent
discount for timely payment.
Advertising and Slotting Costs
Production costs of advertising (including the cost of coupons) are expensed the
first time the advertising takes place. All other advertising and promotional
costs are expended when incurred. Advertising and coupon costs, which are
included in sales and marketing expenses for 1997 amount to $1,308,230 (none in
1996). Slotting fees paid retailers for shelf space are expensed upon first
shipment to the retailer and are also included in sales and marketing expenses.
Slotting fees expended in 1997 amount to $1,069,424 (none in 1996).
Income Taxes
The Company, with the consent of its stockholders, has elected to be taxed under
sections of federal and state income tax law as an S corporation. As a result of
this election, the corporation does not pay income taxes. Instead, the
stockholders separately pay tax on their pro-rata shares of the Company's
income, deductions, losses and credits.
Statement of Cash Flows Information
Cash and cash equivalents include cash and short-term investments with
maturities of three months or less. During 1997 and 1996, the Company paid
interest of approximately $246,000 and $544, respectively. Non-cash investing
and financing activities includes the following transactions:
F-7
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
1997 1996
---- ----
Equipment acquired pursuant to capital leases $42,607 $ --
Stock issued officers for services, 900 shares -- 225,000
Note C - Bank Line-of Credit
The Company has a line-of credit loan agreement with a Wisconsin bank dated
December 2, 1996. Borrowings thereunder are limited to a maximum of $4 million
through 1997 and $3.2 million thereafter until maturity on December 31, 1998.
Borrowings are also limited by a percentage of qualified receivables, inventory
and fixed assets. The loan is secured by substantially all of the assets of the
Company, assignment of life insurance policies on two officers, and personally
guaranteed by the stockholders. Interest is payable monthly at one-half percent
above the bank's prime rate (a combined total of nine percent as of December 31,
1997). On November 20, 1998, the Company renewed and extended the bank agreement
(see Note J).
Note D - Leases
Operating Leases
The Company leases its manufacturing, warehouse and office facility in Eau
Claire, Wisconsin pursuant to an agreement ending December 31, 2001. The annual
base rent of $187,920 is subject to increases in inflation and the Company is
responsible for principally all operating expenses. The agreement provides the
Company options to renew the lease for two successive five-year terms. Rent for
the facility was $187,920 in 1997 (none in 1996).
The Company leases certain computer equipment with terms ending in 1999. The
combined monthly obligation for these leases is $617. Minimum annual rentals
subsequent to 1997 for operating leases are as follows:
Year ending December 31,
1998 $ 195,319
1999 194,631
2000 187,920
2001 187,920
---------
$ 765,790
=========
Capital Leases
The Company leases a copier and two forklifts. Upon expiration of the leases,
the Company may purchase the leased equipment at fair market value. Since the
leases qualify as capital leases, the $42,607 present value of the minimum lease
payments at the inception of the leases is included in the cost of property and
equipment. Future minimum lease payments are as follows:
F-8
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
Year ending December 31,
1998 $ 10,870
1999 10,737
2000 10,071
2001 9,232
--------
Total payments 40,910
Amount representing interest (6,582)
--------
Present value of future
minimum lease payments $ 34,328
========
Remaining capital lease obligations are classified as follows in the balance
sheet:
Current maturities $ 8,030
Long-term 26,298
--------
$ 34,328
========
Note E - Stockholders' Equity
April 1, 1996, the Company sold 5,100 shares of common stock to eight
individuals for $1,275,000 ($250 per share). In addition, 900 shares were issued
April 1, 1996 (at $250 per share) for services: 140 shares to an officer for
1997 legal services and 760 shares to two operating officers for future
services. The shares issued for future services vest annually over a three-year
period beginning December 31, 1997. Accordingly, deferred compensation of
$190,000 was recorded and is being amortized to expense over the three-year
vesting period. Vesting of the officer shares is accelerated upon sale or merger
of the Company or death or disability of the officer.
March 3, 1997, an investor sold 420 shares of stock to the Company for $112,000
($267 per share). The sale price included a provision for interest of $7,000.
The purchased shares are recorded as treasury stock.
June 30, 1997 a chief executive officer was hired that acquired 100 shares for
$250 per share with funds paid him pursuant to an employment agreement. The
agreement also provided for issuance of 320 shares for services to vest over a
three-year period. The officer was terminated March 23, 1998 and the 100 shares
were returned to the Company for $10,700 and the unvested shares canceled
pursuant to a separation agreement. Since the 320 service shares will not vest
they have not been reflected as outstanding in the accompanying financial
statements.
September 17, 1997, five of the initial investors paid $1 million to purchase
4,000 shares of common stock ($250 per share). The funds provided were necessary
to finance continued start-up activities and protect the initial investment of
the individuals. Consequently, this sale of the stock is not considered by the
board of directors as an indicator of the fair value of the Company on September
17, 1997, but rather additional paid-in capital.
F-9
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
Note F - Employee Retirement Plan
The Company adopted a Section 401(k) employee retirement plan on January 1,
1997. Participants may choose to contribute up to 15% of their compensation to
the plan. In addition, the Company may contribute a matching amount in its sole
discretion. There were no employer contributions for 1997. Accumulated plan
benefits and net assets as of December 31, 1997 were $4,791 (all vested).
Note G - Related Party Transactions
The Company paid a related company $43,824 for operating supplies,
administrative and accounting services. The Company's chairman of the board of
directors is a major stockholder in both companies. Another officer was paid
$29,239 in 1997 for legal services and 140 shares of common stock in 1996 for
legal services valued at $35,000.
Note H - Commitments and Contingencies
Option to Purchase Wood Pulp
June 30, 1997, the Company entered into an option agreement with a supplier to
purchase 1,800 metric tons wood pulp at a pre-determined price between August 1,
1997 and May 31, 1998. The agreement also grants the supplier the right of first
refusal for orders in excess of the optioned tonnage at prevailing market
prices.
License Agreement
January 12, 1997, the Company entered an agreement with another company, which
grants Jettar a non-exclusive license to manufacture and sell diapers covered by
a patent. The license expires upon the later of expiration of the patent or July
3, 2007. The Company may also terminate the agreement upon six months written
notice. In 1997 the Company paid an initial license fee of $10,000 and royalties
totaling $8,232. The royalty rate in 1997 was .16% of applicable sales, and
decreases to .11% in 1998 and .10% thereafter.
Settlement of Dispute with Competitor
On September 2, 1998, the Company entered into a settlement agreement with a
national diaper manufacturer, wherein it was alleged the Company had infringed
on certain patent rights. Terms of the settlement require payment of royalties
to the manufacturer of three percent of net sales of certain disposable diapers
and five percent of absorbent pants effective August 13, 1998 for the term of
the patents. In the event the Company's sales for the period January 1, 1997 to
August 12, 1998 exceed $15,840,000, the manufacturer is not bound by the
agreement and may seek damages.
Year 2000 Issue
The Company is cognizant of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000" problem
is pervasive and complex, as virtually every computer operation will be affected
in some way. Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date field. These date code fields
will need to accept four digit entries to distinguish
F-10
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
21st century dates from 20th century dates. As a result, in less than two years
computer systems and/or software used by the Company will need to be upgraded to
comply with such Year 2000 requirements. The Company is presently evaluating and
upgrading its software and hardware, so that its computer systems will function
properly with respect to Year 2000 and beyond. The Company expects to have all
major computer systems year 2000 compatible before December 31, 1999.
Note I - Fair Value of Financial Instruments
The Company has adopted Statement of Financial Accounting Standards No. 107,
"Disclosure About Fair Value of Financial Instruments," which requires
disclosing fair value to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement. The following table
summarizes financial instruments by individual balance sheet classifications as
of December 31, 1997:
Carrying Amount Fair Value
--------------- ----------
Cash $ 793 $ 793
Bank line-of credit 2,948,000 2,948,000
Capital lease obligations 28,984 28,984
Note J - Events Subsequent to December 31, 1997
September 23, 1998, the Company announced its intention to merge with RMED
International, Inc., a customer of the Company beginning in April 1998. The
merger was completed November 23, 1998 and the Company became a wholly-owned
subsidiary of RMED upon exchange of 2.8 million shares of RMED common stock for
all of the outstanding stock of the Company. In addition, the stockholders of
the Jettar received a two-year option to acquire a total of 801,824 shares of
RMED common stock at $1 per share.
November 20, 1998, Jettar's bank line-of credit loan agreement was renewed and
extended to June 30, 2000. Borrowings continue to be limited by a percentage of
qualified receivables, inventory and fixed assets, are secured by substantially
all Company assets, and bank approval is required for significant corporate
activities including capital expenditures, sale of stock and payment of
dividends. Also, the interest rate was increased to .75 percent above the bank's
prime rate with maximum borrowings as follows:
Period Commitment Amount
------ -----------------
Closing (November 23, 1998) through December 31, 1998 $3.2 million
January 1, 1999 through January 31, 1999 $3.1 million
February 1, 1999 through February 28, 1999 $3.0 million
March 1, 1999 through March 31, 1999 $2.9 million
April 1, 1999 through April 30, 1998 $2.8 million
May 1, 1999 through May 31, 1999 $2.7 million
June 1, 1999 through June 30, 1999 $2.56 million
F-11
<PAGE>
JETTAR, LTD.
Notes to Financial Statements
July 1, 1999 through September 30, 1999 $2.135 million
October 1, 1999 through December 31, 1999 $1.71 million
January 1, 2000 through Maturity (June 30, 2000) $1.3 million
Note K - Unaudited Interim Financial Statements
The financial statements for the nine months ended September 30, 1998 and 1997
are unaudited; however, in the opinion of management all adjustments (consisting
solely of normal recurring adjustments) necessary in order to make the interim
financial statements not misleading have been made. The results of the interim
periods are not necessarily indicative of the results to be obtained for a full
fiscal year.
F-12
<PAGE>
Item 7. Financial Statements and Exhibits
On November 23, 1998, RMED International, Inc. (the "Company" or "RMED")
acquired Jettar, Ltd. ("Jettar"), a privately held diaper manufacturing and
distributing company located in Eau Claire, Wisconsin. The merger of the two
companies is pursuant to a stock-for stock agreement wherein Jettar stockholders
received 2.8 million shares of RMED common stock for all of the issued and
outstanding stock of Jettar. In addition, Jettar stockholders received options
to purchase a total of 810,924 shares of RMED common stock for two years at
$1.00 per share. The following pro forma financial statements and notes thereto
are presented assuming the merger will be accounted for as a "pooling of
interests." Under this method of accounting, RMED will restate its consolidated
financial statements to include Jettar's assets, liabilities, stockholder'
equity and results of operations.
The unaudited pro forma combined condensed financial statements presented below
are based on assumptions the Company believes are reasonable and which the
Company believes are both factually supportable and directly attributable to the
merger. The unaudited pro forma combined condensed financial statements of RMED
and Jettar reflect their business combination as of September 30, 1998 and for
the nine months then ended. The information set forth in the unaudited pro forma
financial statements below should be read with the historical financial
statements and notes thereto and other information included in: (a) RMED's 1977
Annual Report on Form 10-KSB, (b) RMED's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998, and (c) Jettar's financial statements for the
year ended December 31, 1997 included in Item 7 of this Report.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the results of operations or financial position that
actually would have occurred had the merger with Jettar been consummated on the
dates indicated or that may be obtained in the future.
Unaudited Pro Forma Combined Condensed Balance Sheet
The pro forma balance sheet reflects the combination of the historical balance
sheets of RMED and Jettar at September 30, 1998, as if the merger and issuance
of 2.8 million shares of RMED common stock to Jettar stockholders had occurred
as of that date.
Unaudited pro Forma Combined Condensed Statement of Operations
The pro forma statement of operations reflects the combination of the historical
operating results of RMED and Jettar for the nine months ended September 30,
1998.
F-13
<PAGE>
RMED International, Inc. and Jettar, Ltd.
Unaudited Pro Forma Combined Condensed Balance Sheet
As of September 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- -----------------------------
RMED Jettar Adjustments Combined
---- ------ ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 79,554 $ 31,577 $ -- $ 111,131
Accounts and notes receivable, net 229,606 1,112,359 (166,609)[3] 1,175,356
Inventory 238,302 1,250,015 (32,300)[3] 1,456,017
Other 4,627 177,467 -- 182,094
----------- ----------- ------------ -----------
Total Current Assets 552,089 2,571,418 (198,909) 2,924,598
Property and equipment, net 227,339 2,233,076 -- 2,460,415
Other assets 78,142 59,390 -- 137,532
----------- ----------- ------------ -----------
$ 857,570 $ 4,863,884 $ (198,909) $ 5,522,545
=========== =========== ============ ===========
LIABILITIES AND EQUITY
Debt maturing in one year $ 3,477 $ 517,600 $ -- $ 521,077
Other current liabilities 385,840 1,724,772 (149,622)[3] 1,960,990
----------- ----------- ------------ -----------
Total Current Liabilities 389,317 2,242,372 (149,622) 2,482,067
Long term debt 139,138 2,155,384 -- 2,294,522
----------- ----------- ------------ -----------
528,455 4,397,756 (149,622) 4,776,589
----------- ----------- ------------ -----------
STOCKHOLDERS' EQUITY
Common stock 63,960 10,100 17,900 [1] 91,960
Contributed capital 5,160,412 2,514,900 (140,600)[1] 7,534,712
Accumulated deficit (4,895,257) (1,936,172) (49,287)[3] (6,880,716)
Treasury stock -- (122,700) 122,700 [1] --
----------- ----------- ------------ -----------
Total Stockholders' Equity 329,115 466,128 (49,287) 745,956
----------- ----------- ------------ -----------
$ 857,570 $ 4,863,884 $ (198,909) $ 5,522,545
=========== =========== ============ ===========
</TABLE>
RMED International, Inc. and Jettar, Ltd.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- -----------------------------
RMED Jettar Adjustments Combined
---- ------ ----------- --------
<S> <C> <C> <C> <C>
NET SALES $1,887,271 $12,493,982 $ (82,800)[3] $14,298,453
COST OF GOODS SOLD 1,023,970 7,624,190 (50,500)[3] 8,597,660
----------- ----------- ------------ -----------
Gross Profit 863,301 4,869,792 (32,300) 5,700,793
OPERATING EXPENSES 827,676 4,503,657 16,987 [3] 5,348,320
----------- ----------- ------------ -----------
Operating Income 35,625 366,135 (49,287) 352,473
INTEREST AND OTHER 53,020 (206,273) - (153,253)
----------- ----------- ------------ -----------
Net Income $ 88,645 $ 159,862 $ (49,287) $ 199,220
=========== =========== ============ ===========
BASIC EARNINGS PER SHARE $ 0.01 $ 0.02
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.01 $ 0.02
=========== ===========
WEIGHTED SHARES - BASIC 6,384,328 2,800,000 [2] 9,184,328
=========== ============ ===========
WEIGHTED SHARES - DILUTED 7,401,992 2,830,843 [2] 10,232,835
=========== ============ ===========
</TABLE>
F-14
<PAGE>
RMED International, Inc. and Jettar, Ltd.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
Note A - Basis of Presentation
The accompanying unaudited pro forma combined condensed financial statements
include the historical financial statements of RMED and Jettar and are intended
to reflect the impact of their merger. On November 23, 1998 RMED and Jettar
completed the merger, in a transaction in which each share of Jettar common
stock was converted into and exchanged for 289.2562 shares of RMED common stock
(equivalent to 2.8 million shares, or 30.5% of the outstanding shares of RMED
common stock at the time of the merger). Jettar, Ltd. was discontinued effective
with the merger, which is accounted for as a "pooling of interests" and a
tax-free reorganization. Effective with the merger, the RMED historical
financial statements have been restated to include the accounts of Jettar.
The accompanying pro forma financial statements are presented for illustrative
purposes only and do not give effect to any cost savings which may result from
the integration of RMED's and Jettar's operations. These potential savings, as
well as any potential revenue synergies, reflect future opportunities, including
the reduction of expected cost increases, and do not necessarily involve
reductions from historical cost levels. As the nature of any dispositions
relating to the overlapping resources is uncertain, the accompanying pro forma
financial statements do not reflect any such disposition which may be made or
consideration which may be received. Differences in accounting policies do not
have a material effect on either the pro forma financial position or pro forma
results of operations and have not been reflected in the pro forma financial
statements. The pro forma statement of operations reflects the merger as if it
had taken place on January 1, 1998.
The pro forma financial statements are not necessarily indicative of the results
of operations or financial position that actually would have occurred had the
merger been consummated on the date indicated or that may be obtained in the
future. These unaudited pro forma financial statements should be read in
conjunction with the related historical financial statements and notes thereto
of: (a) RMED's 1997 Annual Report on Form 10-KSB, (b) RMED's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1998, and, (c) Jettar's
financial statements for the year ended December 31, 1997 included in Item 7 of
this Report. It is expected that RMED and Jettar will, subsequent to the
completion of the merger, perform comprehensive reviews of the combined
companies' operations and strategic initiatives. Though the results of any such
reviews cannot be determined at this time, such reviews may result in
significant accounting charges.
Note B - Pro Forma Adjustments
1. Stockholders' equity accounts have been adjusted to reflect the issuance of
2.8 million shares of RMED common stock in exchange for all of the issued
and outstanding Jettar common stock (based on the exchange ratio of
approximately 289.2563 per share).
F-15
<PAGE>
RMED International, Inc. and Jettar, Ltd.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
2. Pro forma combined earnings per common share and earnings per common share
assuming dilution are based on the combined weighted average shares
outstanding after conversion of shares of Jettar common stock into shares
of RMED common stock from the beginning of the period presented.
3. Sales and profit on sales for transactions between RMED and Jettar have
been eliminated.
Note C - Federal Income Taxes
The unaudited pro forma combined condensed financial statements assume that the
merger qualifies as a tax-free reorganization for federal income tax purposes.
As a result of available net operating loss carryovers, a provision for income
taxes has not been provided on pro forma net income.
Note D - Recent Development
November 20, 1998, Jettar's bank line-of credit loan agreement was renewed and
extended to June 30, 2000. Borrowings continue to be limited by a percentage of
qualified receivables, inventory and fixed assets, are secured by substantially
all Company assets, and bank approval is required for significant corporate
activities including capital expenditures, sale of stock and payment of
dividends. Also, the interest rate was increased to .75 percent above the bank's
prime rate with maximum borrowings as follows:
Period Commitment Amount
------ -----------------
Closing (November 23, 1998) through December 31, 1998 $3.2 million
January 1, 1999 through January 31, 1999 $3.1 million
February 1, 1999 through February 28, 1999 $3.0 million
March 1, 1999 through March 31, 1999 $2.9 million
April 1, 1999 through April 30, 1998 $2.8 million
May 1, 1999 through May 31, 1999 $2.7 million
June 1, 1999 through June 30, 1999 $2.56 million
July 1, 1999 through September 30, 1999 $2.135 million
October 1, 1999 through December 31, 1999 $1.71 million
January 1, 2000 through Maturity (June 30, 2000) $1.3 million
The pro forma financial statements do not reflect any adjustments related to the
renewal of the bank agreement.
