SECURITIES AND EXCHANGE COMMISSSION
Washington, DC 20549
Form 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File No. 0-14696
RMED International, Inc.
------------------------
(Exact Name of Registrant and Specified in its Charter)
Colorado 84-0898302
- -------- ----------
(State of Incorporation) 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
Parvalue(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 9,220,958 shares of the Registrant's $.01 par value common stock
outstanding as of March 31, 1999.
<PAGE>
RMED International, Inc.
Condensed Financial Statements
Table of Contents
PAGE
PART I. Item 1.
Condensed Balance Sheet as of March 31, 1999 and F-1
December 31, 1998
Condensed Statements of Operations for the three months F-2
ended March 31, 1999 and 1998
Condensed Statements of Cash Flows for the three months F-3
ended March 31, 1999 and 1998
Condensed Statements of Changes in Stockholders' Equity
for the three months ended March 31, 1999. F-4
Notes to Condensed Financial Statements F-5
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. Other Information 9
Signatures 10
<PAGE>
RMED International, Inc.
Balance Sheet
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 155,308 $ 120,504
Accounts receivable, less allowance for uncollectible
accounts of $26,000 and $29,000, respectively 896,235 832,898
Notes receivable, current maturities 16,438 25,180
Inventory, at cost 1,133,638 979,770
Prepaid and other 185,228 192,340
---------- -----------
2,386,847 2,150,692
---------- -----------
NOTES RECEIVABLE, less current maturities 46,070 47,034
---------- -----------
PROPERTY AND EQUIPMENT, at cost
Land and building 245,000 245,000
Furniture and office equipment 115,746 105,116
Machinery and equipment 2,712,186 2,712,186
---------- -----------
3,072,932 3,062,302
Less accumulated depreciation (712,629) (642,779)
----------- -----------
2,360,303 2,419,523
----------- -----------
OTHER ASSETS 43,580 43,853
----------- -----------
$ 4,836,800 $ 4,661,102
=========== ===========
CURRENT LIABILITIES
Long-term debt, current maturities $ 775,277 $ 1,354,406
Loans from directors 516,926 71,860
Bank overdraft 207,029 --
Accounts payable and accrued liabilities 1,756,943 1,516,283
----------- -----------
3,256,175 2,942,549
LONG-TERM DEBT, less current maturities 1,453,157 1,866,042
----------- -----------
4,709,332 4,808,591
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value; 50,000,000 shares authorized;
9,220,958 and 9,195,958 shares issued and outstanding 92,210 91,960
Contributed capital 7,546,962 7,534,712
Accumulated deficit (7,511,704) (7,774,161)
----------- -----------
127,468 (147,489)
----------- -----------
$ 4,836,800 $ 4,661,102
=========== ===========
</TABLE>
See accompanying notes.
F-1
<PAGE>
RMED International, Inc.
Statement of Operations
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
(Unaudited) (Unaudited)
SALES $ 3,901,706 $ 4,144,571
COST OF GOODS SOLD (2,194,364) (2,448,210)
------------ -----------
GROSS PROFIT 1,707,342 1,696,361
------------ -----------
OPERATING EXPENSES
Sales and marketing 1,125,723 1,904,418
General and administrative 285,675 308,061
------------ -----------
1,411,398 2,212,479
------------ -----------
OPERATING INCOME (LOSS) 295,944 (516,118)
------------ -----------
OTHER INCOME (EXPENSE)
Interest expense (59,189) (76,174)
Interest income 6,467 8,364
Gain on sale of assets and other 19,235 9,519
------------ -----------
(33,487) (58,291)
------------ -----------
NET INCOME $ 262,457 $ (574,409)
============ ===========
BASIC EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.06)
============ ===========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.02 $ (0.06)
============ ===========
WEIGHTED AVERAGE SHARES - BASIC 9,205,680 9,200,185
============ ===========
WEIGHTED AVERAGE SHARES - DILUTED 10,511,882 9,200,185
============ ===========
F-2
<PAGE>
RMED International, Inc.
Statement of Cash Flows
Three Months Ended
---------------------
March 31, March 31,
1999 1998
-------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited) (Unaudited)
Net income $ 262,457 $(574,409)
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 69,873 71,443
Changes in assets and liabilities:
Accounts receivable (63,337) 183,412
Inventory (153,868) (101,339)
Prepaid and other 7,112 (5,377)
Accounts payable and accrued liabilities 240,660 538,720
--------- ---------
NET CASH FROM OPERATIONS 362,897 112,450
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments received on notes receivable 9,706 6,443
Decrease in other assets 250 29,151
Purchases of equipment (10,630) (1,370)
--------- ---------
NET CASH FROM (USED FOR) INVESTING ACTIVITIES (674) 34,224
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from directors 500,000 102,000
Increase (decrease) in bank overdraft 207,029 (286,236)
Proceeds from exercise of stock options 12,500 --
Borrowings (payments) on bank line-of credit, net (989,000) 249,000
Payments on loans from officer (54,934) (117,990)
Payments on capital leases (1,935) (1,939)
Payments on mortgage note (1,079) (917)
--------- ---------
NET CASH FROM (USED FOR) FINANCING ACTIVITIES (327,419) (56,082)
--------- ---------
NET INCREASE (DECREASE) IN CASH 34,804 90,592
CASH, beginning of period 120,504 179,547
--------- ---------
CASH, end of period $ 155,308 $ 270,139
========= =========
F-3
<PAGE>
RMED International, Inc.
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Contributed Accumulated
------------------------------
Shares Amount Capital Deficit
-------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
December 31, 1998 9,195,958 $91,960 $7,534,712 $(7,774,161)
Exercise of stock options 25,000 250 12,250 --
Net income (unaudited) -- -- -- 262,457
------------ ------- ----------- -----------
March 31, 1999 (Unaudited) 9,220,958 $92,210 $7,546,962 $(7,511,704)
============ ======= =========== ===========
</TABLE>
F-4
<PAGE>
RMED International, Inc.
Notes to Condensed Financial Statements
Three Months Ended March 31, 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. As a result of the
merger, the separate existence of Jettar ceased. 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 related to the merger 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 using the "treasury stock" method. Basic and diluted earnings
per share for the three months ended March 31, 1998 are the same since the
Company had a net loss for the period and the inclusion of stock options and
other incremental shares would be antidilutive.
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, and unpaid principal and
accrued interest is due December 15, 1999. The loans are unsecured and
subordinate to the bank line-of credit.
Note D - Contingency
In August 1994, the Company commenced an action in the United States District
Court for the Southern District of New York against Sloan's Supermarkets, Inc.
and John A. Catsimatidis to recover damages based on the defendants' failure to
disclose, in its public filings and otherwise, the existence of an investigation
by the Federal Trade Commission ("FTC") regarding the concentration of
supermarkets by entities owned or controlled by the defendants. The Company
purchased approximately 226,000 shares of Sloan's common stock in November and
December 1993, in open market transactions on the American Stock Exchange,
without knowledge of the FTC investigation, and sold a portion of these shares
at a loss after June 2, 1994, when the Company learned of the FTC investigation.
The legal action has been certified as a "class action" with the Company the
class action representative. Litigation is subject to many uncertainties and the
Company is unable to predict the outcome of this matter.
F-5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATONS
----------------------------------
RMED International, Inc. ( the "Company", "RMED") was incorporated
under the laws of the State of Colorado on December 28, 1982, and is
in the business of manufacturing, marketing and selling baby
disposable 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.
The acquired facility is over 80,000 square feet and is used as a
central distribution point for all RMED products. RMED now has its own
full machine shop and a testing lab in which we can pursue our goal of
improving absorbency with natural materials. The acquired diaper
machine produces up to 400 disposable diapers per minute and has a
value of over two million dollars.
The Company is marketing its products internationally through health
product stores, mainstream supermarkets, the Internet, mail order,
catalogues and in a direct marketing partnership with Earth's Best
Baby Food, a division of H.J. Heinz Company.
Product Description
-------------------
Tushies(R)-The Alternative GEL-FREE Disposable Diaper featuring its
patented natural blend cotton absorbency and cloth-like backsheet is
available in four sizes and sold primarily in health product stores,
mail order, catalogues and the Internet on the Whole Foods, ECOMALL
and Earth's Best websites. Earth's Best is the largest certified
organic baby food in the United States.
TushiesWipes(TM)-Under the TushiesWipes brand, the Company offers
natural formula wipes in Tubs, Refills and Travelpacks. The wipes
contain Aloe Vera, are Hypo-Allergenic and Alcohol-FREE.
TushiesBear T-Shirts-Made with 100% organic cotton.
Bibbies(R)-Patented and invented by a pediatrician, the non-toxic,
absorbent and waterproof disposable bibs are sold through our usual
channels.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION cont'd
------------------------------
TenderCare(R) Disposable Diapers-Manufactured by RMED allowing us to
be price and design competitive with the leading national brands.
TenderCare is made without artificial chemical absorbents and is sold
in major supermarkets and health product stores.
Bumpies(R) Disposable Diapers-A mainstream diaper that is sold through
major supermarkets in the Midwest and Mid-Atlantic regions at a
competitive price and is available in regular, jumbo and mega-size
packaging.
Rock-A-Bye(R) Disposable Diapers-Sold internationally to distributors
and retailers under branded and private labels.
The Company currently holds patents, registrations, various trademarks
and Internet domain names for its products.
MATERIAL CHANGES IN FINANCIAL POSITION
--------------------------------------
Total assets of the Company increased $175,698 from $4,661,102 at
December 31, 1998 to $4,836,800 at March 31, 1999.
During the three month period ended March 31, 1999, net working
capital decreased $77,471 primarily due to loans from directors and
increases in a bank overdraft, accounts payable and accrued
liabilities.
Total liabilities at March 31, 1999 were $4,709,332 compared to
$4,808,591 at December 31, 1998. The decrease of $99,259 in total
liabilities was primarily due to the decrease in long term debt,
current maturities, offset by loans from directors and an increase in
accounts payable and accrued liabilities.
Total stockholders' equity increased $274,957 during the three month
period ended March 31, 1999. The increase was primarily a result of a
decrease in operating expenses.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION cont'd
------------------------------
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1999 were $3,901,706
compared to $4,144.571 for the quarter ended March 31, 1998, a
decrease of less than 6%.
Gross profit increased to $1,707,342 in the quarter ended March 31,
1999 compared to $1,696,361 in the quarter ended March 31, 1998.
Operating expenses for the quarter period ended March 31, 1999 were
$1,411,398 compared to $2,212,479, a decrease of 36%, due primarily to
a decrease in sales and marketing expenses.
Net income for the quarter ended March 31, 1999 was $262,457 compared
to a net loss of ($574,409) for the quarter ended March 31, 1998, an
increase of $836,866, primarily due to a decrease in sales and
marketing expenses.
Liquidity and Capital Resources
-------------------------------
At March 31, 1999 the Company had working capital ($869,328)
consisting of $2,386,847 in current assets and $3,256,175 in current
liabilities.
As of March 31, 1999 the Company's long term debt is $1,453,157,
consisting of a mortgage payable on the Delta, Colorado facility
($136,825), non-current maturities of a bank line of credit
($1,300,000) and capital leases ($16,332).
Year 2000 Issues
----------------
The Eau Claire, WI facility is fully Y2K compliant. The Delta, CO
facility will be compliant within the next 120 days.
Except for historical matters contained herein, the matters discussed
are forward-looking and are 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.
8
<PAGE>
PART II. Other Information
Items 1-6. Not applicable.
9
<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: May 3, 1999
/s/Brenda Schenk
------------------------
Brenda Schenk
President & Principal
Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 155,308
<SECURITIES> 0
<RECEIVABLES> 896,235
<ALLOWANCES> 26,000
<INVENTORY> 1,133,638
<CURRENT-ASSETS> 2,386,847
<PP&E> 3,072,932
<DEPRECIATION> 712,629
<TOTAL-ASSETS> 4,836,800
<CURRENT-LIABILITIES> 3,256,175
<BONDS> 1,453,157
0
0
<COMMON> 92,210
<OTHER-SE> 35,258
<TOTAL-LIABILITY-AND-EQUITY> 4,836,800
<SALES> 3,901,706
<TOTAL-REVENUES> 3,901,706
<CGS> 2,194,364
<TOTAL-COSTS> 1,411,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,184
<INCOME-PRETAX> 262,457
<INCOME-TAX> 0
<INCOME-CONTINUING> 262,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,457
<EPS-PRIMARY> .03
<EPS-DILUTED> .02
</TABLE>
