<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended January 31, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1943 for the transition period from ______________ to ______________.
1-9087
(Commission file no.)
SUMMA RX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1535372
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
2940 FM 3028, Mineral Wells, Texas 76067
(Address of principal executive office) (Zip Code)
(940) 325-0771
(Registrant's telephone number, including area code)
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 Act of 1934 during the
preceding 12 months (or for a 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 [ ]
As of January 31, 2000 there were 3,145,838 shares of common stock outstanding.
<PAGE> 2
SUMMA RX LABORATORIES, INC.
TABLE OF CONTENTS
FORM 10-QSB
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION 3
Item 1 - Financial Statements 3
Balance Sheet 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to the Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION 9
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities 9
Item 3 - Defaults Upon Senior Securities 9
Item 4 - Submission of Matters to a Vote of Security Holders 9
Item 5 - Other information 9
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 9
</TABLE>
2
<PAGE> 3
SUMMA RX LABORATORIES, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
January 31,
2000
------------
<S> <C>
ASSETS
Cash $ 1,746,926
Trade Accounts Receivable, less
allowance for doubtful accounts of $142,162 166,145
Inventory 354,642
Other Current Assets 96,295
------------
Total Current Assets 2,364,008
Property, plant and equipment 2,060,737
Less accumulated depreciation 660,697
------------
Net property, plant and equipment 1,400,040
Land 5,798
Other Assets 1,195
------------
Total assets $ 3,771,041
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 587,347
Accrued Liabilities 448,007
Customer Deposits 186,634
------------
Total current liabilities 1,221,988
Long Term Debt 380,000
------------
Total Liabilities 1,601,988
Common stock 31,458
Additional paid-in capital 3,219,379
Accumulated deficit (1,081,784)
------------
Stockholders' equity 2,169,053
------------
Total liabilities and stockholders' equity $ 3,771,041
============
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
SUMMA RX LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
January 31 January 31
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 1,110,283 $ 513,474 $ 2,623,431 $ 1,930,779
Cost of Goods sold 890,898 443,770 2,082,157 1,332,225
------------ ------------ ------------ ------------
Gross Profit 219,385 69,704 541,274 598,554
Selling, general and administrative 216,486 231,153 768,684 717,521
------------ ------------ ------------ ------------
Operating profit (loss) 2,899 (161,449) (227,410) (118,967)
Other income (expense) (4,793) (18,459) (39,844) (55,290)
------------ ------------ ------------ ------------
Net Income (loss) before
extraordinary items (1,894) (179,908) (267,254) (174,257)
------------ ------------ ------------ ------------
Gain on settlement of Arbitration
net of income tax of $315,372 1,886,719 0 1,886,719 0
------------ ------------ ------------ ------------
Net Income (loss) $ 1,884,825 $ (179,908) $ 1,619,465 $ (174,257)
============ ============ ============ ============
Basic earnings (loss) per share .60 (.06) .51 (.06)
============ ============ ============ ============
Weighted average shares outstanding 3,145,838 3,145,838 3,145,838 3,145,838
------------ ------------ ------------ ------------
Diluted earnings (loss) per share .60 (.06) .51 (.06)
============ ============ ============ ============
Diluted shares outstanding 3,145,838 3,145,838 3,145,838 3,145,838
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE> 5
SUMMA RX LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
January 31
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 4,258,132 $ 2,031,596
Cash paid to suppliers and employees (2,111,163) (1,930,745)
Interest paid (54,498) (54,239)
------------ ------------
Net cash provided by operating activities 2,092,471 46,612
Cash flows from investing activities:
Capital expenditures (424,165) (178,236)
------------ ------------
Net cash provided by (used in) investing activities (424,165) (178,236)
Cash flows from financing activities:
Payments of long-term debt (190,000) 0
------------ ------------
Net cash provided by (used in) financing activities (190,000) 0
------------ ------------
Net increase (decrease) in cash 1,478,306 (131,624)
Cash at beginning of period 268,620 415,227
------------ ------------
Cash at end of period $ 1,746,926 $ 283,603
============ ============
Reconciliation of profit (loss) to net cash Provided by
operating activities:
Net profit (loss) $ 1,619,465 $ (174,257)
Adjustments to reconcile profit (loss) to
net cash used in operating activities:
Depreciation and amortization 77,466 70,032
Changes in assets and liabilities:
Accounts receivable 14,954 66,954
Inventories (159,112) (96,363)
Other current assets (16,741) 6,667
Accounts payable and accrued expenses 556,439 173,579
------------ ------------
Net cash provided by operating activities $ 2,092,471 $ 46,612
============ ============
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE> 6
SUMMA RX LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND GENERAL
Summa is engaged in the business of manufacturing and marketing of
pharmaceuticals, dietary supplements and nutritional products for sale under its
own label and under contract for others. Its executive offices and manufacturing
facilities are located at 2940 FM 3028, Mineral Wells, Texas 76067.
The Unaudited interim financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying Unaudited interim financial statements and related notes should be
read in conjunction with the financial statements notes thereto included in the
Corporation's most recent Form 10-K covering fiscal year ended April 30, 1999
The information furnished reflects, in the opinion of the management all
adjustments necessary for a fair presentation of the financial results for the
interim period presented.
NOTE 2 - TRANSACTIONS AFFECTING STOCKHOLDER'S EQUITY
There were 2,000,000 shares of $0.10 par value preferred stock authorized and no
shares issued and outstanding at January 31, 2000 and no shares issued and
outstanding at April 30, 1999. In October 1997 the final preferred shareholder
converted his 50,000 shares into 51,973 shares of common.
There were 10,000,000 shares of $.01 par value common stock authorized and
3,145,838 shares issued and outstanding at January 31, 2000 and 3,145,838 shares
issued and outstanding at April 30, 1999.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average common shares
outstanding during the three months and nine months periods ended January 31,
2000 and 1999. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised and converted into common stock or resulted in the issuance of common
stock that then shared in the earnings.
NOTE 4 - EXTRAORDINARY ITEMS
On December 7, 1999 JB Williams Company, Inc. ("Williams") paid Summa Rx
Laboratories, Inc. ("Summa") the sum of $2,478,151 pursuant to the provisions of
the Award of Arbitrator entered on November 1, 1999. The award is presented net
of expenses of $276,060 and income taxes of $315,372. Summa brought the action
in arbitration seeking damages based upon Williams' claim of termination of a
manufacturing and sales agreement entered into by Summa and Williams on July 11,
1997.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Sales for the third quarter increased 116% when compared to the third quarter of
last year. Sales increased 36% when compared to the nine-month period in 1999.
Summa changed its manufacturing philosophy in 1991 to actively seek to do
contract manufacturing for others. Since that change in philosophy, Summa has
actively sought customers for whom it is able to manufacture powders, tablets or
capsules and whose needs and volumes are not sufficient to interest large
manufacturers
<TABLE>
<CAPTION>
Three months Nine months
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 1,110,283 $ 513,474 $ 2,623,431 $ 1,930,779
</TABLE>
Cost of goods can fluctuate dramatically due to the nature of our business,
contract manufacturing. Management strives to maintain cost of goods between 70%
to 75% of sales. Cost of goods sold decreased from 86% to 80% and increased from
68% to 79% for the comparable prior periods.
<TABLE>
<CAPTION>
Three months Nine months
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cost of Goods $ 890,898 $ 443,770 $ 2,082,157 $ 1,332,225
</TABLE>
The dollar value of general and administrative expenses has remained constant
excluding legal and professional fees due to management's diligence to control
expenses. General and administrative expenses decreased from 39% to 13% and
increased from 21% to 29% of sales respectfully for the comparable periods last
year. Of the decrease during the three-month period 19% and 10 % of the increase
for the nine-month period is associated with legal and professional fees
incurred during arbitration over the patented zinc product. Selling expenses
were consistent during the three-month period at 6% but decreased from 16% to 8%
during the nine-month period.
<TABLE>
<CAPTION>
Three months Nine months
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Selling, general and administrative $ 216,486 $ 231,153 $ 768,684 $ 717,521
</TABLE>
Interest expense was primarily on loans from stockholders.
7
<PAGE> 8
FINANCIAL CONDITION
In May 1998, the company issued ten percent (10%) subordinated callable notes in
the amount of $380,000 due May 15, 2003. The funds were generated and set aside
for capital expenditures.
In March, 1997 Summa entered into a license agreement with the inventor and
patent holder to manufacture and sell zinc lozenges worldwide. The basis of that
agreement was assistance and consultation provided to the inventor by Summa over
the past ten years during which time Summa worked with and assisted the
inventor/researcher to develop and obtain six United States patents on zinc
lozenges.
In May 1997, Summa entered into a manufacturing and sales agreement with a
distribution company that provided for minimum annual sales of zinc lozenge
tablets with increased annual minimums in the third year of the contract.
In June 1997 the distribution company introduced Summa to the JB Williams
Company, Inc., the seller of the Cepacol(R) brand product. As a result of that
introduction, Summa has entered into a multi-year manufacturing and sales
agreement with JB Williams Company to supply it with zinc lozenge tablets. That
agreement provides that JB Williams will purchase an annual minimum during the
first two years with an increase of 64% during the remainder of the agreement.
The JB Williams agreement is for a five-year primary term with automatic
five-year extensions thereafter. Sales by JB Williams under its agreement are
limited to the United States of America, its territories and possessions, the
other nations of North America, the nations islands of Central America and the
Caribbean Sea, less Cuba and Greenland.
Because of the JB Williams agreement, the agreement with the Distribution
Company has been amended to allow it to significantly reduce its required annual
minimum purchases.
On December 7, 1999 JB Williams Company, Inc. ("Williams") paid Summa Rx
Laboratories, Inc. ("Summa") the sum of $2,478,151 pursuant to the provisions of
the Award of Arbitrator entered on November 1, 1999. Summa brought the action in
arbitration seeking damages based upon Williams' claim of termination of a
manufacturing and sales agreement entered into by Summa and Williams on July 11,
1997.
8
<PAGE> 9
PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings
Not applicable
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 - Other information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
None
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.
Summa Rx Laboratories, Inc.
March 15, 2000 /s/ Pauline G. Lee
Pauline G. Lee
Secretary and
Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
\
