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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended July 31, 1997.
[ ] 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 (IRS employer
of incorporation or organization) identification no.)
2940 FM 3028, Mineral Wells, Texas 76067
(Address of principal executive office) (Zip Code)
(817) 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 July 31, 1997 there were 3,597,401 shares of common stock outstanding.
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SUMMA RX LABORATORIES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
FORM 10-Q
<TABLE>
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION 3
Item 1 - Financial Statements 3
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Supplemental Notes to the Consolidated 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
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SUMMA RX LABORATORIES, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
July 31, April 30,
ASSETS 1997 1997
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<S> <C> <C>
Cash $ 506,951 $ 236,915
Trade Accounts Receivable, less
allowance for doubtful accounts
of $41,650 and $10,000 239,757 85,492
Inventory 171,682 153,028
Other Current Assets 12,014 11,006
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Total Current Assets 930,403 486,441
Property, plant and equipment 1,389,446 1,091,604
Less accumulated depreciation 427,683 412,767
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Net property, plant and equipment 961,763 678,837
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Land 5,798 5,798
Intangibles 36,676 36,676
Less accumulated amortization 30,651 30,168
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Net intangibles 6,025 6,508
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Total assets $ 1,903,989 $ 1,177,584
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable to related parties $ 104,390 $ 120,827
Accounts Payable 302,971 216,176
Accrued Liabilities 152,825 106,502
Customer Deposits 500,000 85,361
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Total current liabilities 1,060,186 528,866
Long Term Debt 190,000 190,000
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Total Liabilities 1,250,186 718,866
12% cumulative convertible 5,000 5,000
preferred stock
Common stock 35,974 35,974
Additional paid-in capital 3,295,747 3,295,747
Accumulated deficit (2,682,918) (2,878,003)
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Stockholders' equity 653,803 458,718
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Total liabilities and stockholders' equity $ 1,903,989 $ 1,177,584
============ ============
</TABLE>
See supplemental notes to the consolidated financial statements.
3
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SUMMA RX LABORATORIES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31
1997 1996
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<S> <C> <C>
Net Sales $ 1,027,442 $ 665,404
Cost of Goods sold 465,112 492,600
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Gross Profit 562,330 172,804
Selling, general and administrative 358,245 121,809
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Operating profit 204,085 50,995
Other income (expense) (9,000) (5,032)
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Net income 195,085 45,963
Less dividend requirement on preferred
stock 1,500 1,500
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Income allocable to common stockholders $ 193,585 $ 44,463
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Net Income per common share .05 .01
Weighted averages shares outstanding 3,597,401 3,559,817
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</TABLE>
See supplemental notes to the consolidated financial statements.
4
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SUMMA RX LABORATORIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 1,266,924 $ 570,623
Cash paid to suppliers and employees (690,047) (653,645)
Interest paid (9,000)
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Net cash used in operating activities 567,877 (83,022)
Cash flows from investing activities:
Capital expenditures (297,841) (111,967)
Proceeds from sale of assets
Cash effect of stock purchase 98,405
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Net cash provided by (used in)
investing activities (297,841) (13,562)
Cash flows from financing activities:
Short-term borrowings, net
Proceeds from issuance of long-term debt 190,000
Borrowings on related party note payable
Principal payments on long-term debt
Proceeds from issuance of common stock 37,500
Proceeds from issuance of preferred stock
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Net cash provided by financing
activities 227,500
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Net increase (decrease) in cash 270,036 130,916
Cash at beginning of year 236,915 16,708
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Cash at end of year $ 506,951 $ 147,624
============ ============
Reconciliation of net loss to net cash
used in operating activities:
Net profit (loss) $ 195,085 $ 45,963
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 15,399 11,700
Gain (loss) on sale of assets
Changes in assets and liabilities:
Accounts receivable (239,626) 55,225
Inventories (18,654) 27,144
Other current assets (1,008) (30,542)
Accounts payable and accrued expenses 616,681 (192,512)
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Net cash used in operating activities $ 567,877 $ (83,022)
============ ============
</TABLE>
See supplemental notes to the consolidated financial statements.
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SUPPLEMENTAL NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated 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, 1997.
The information furnished reflects, in the opinion of the management of
Summa Rx Laboratories, Inc. all adjustments necessary for a fair presentation of
the financial results for the interim period presented.
Interim results are subject to year-end adjustments and audit by
independent certified public accountants.
There were 2,000,000 shares of $0.10 par value preferred stock authorized
and 50,000 shares issued and outstanding at July 31, 1997 and 50,000 shares
issued and outstanding at April 30, 1997.
There were 10,000,000 shares of $.01 par value common stock authorized and
3,597,401 shares issued and outstanding at July 31, 1997 and 3,597,401 shares
issued and outstanding at April 30, 1997.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
A wholesale prescription drug supplier was acquired as a new customer during the
first quarter of fiscal year 1995. The acquisition of this customer will improve
the seasonality of sales which generally experiences lower sales during the
first two fiscal quarters. Sales for the first quarter increased 8% when
compared to the first quarter of last year.
<TABLE>
<CAPTION>
Three months ended
July 31
1996 1995
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<S> <C> <C>
Sales $ 1,027,442 $ 665,404
</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 80% to 74% when comparing the
first quarter of this year with the same period last year.
<TABLE>
<CAPTION>
Three months ended
July 31
1997 1996
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<S> <C> <C>
Cost of goods $ 465,112 $ 492,600
</TABLE>
The dollar value of general and administrative expenses have remained constant
due to management's diligence to control expenses. Selling, expenses remain
constant due to the nature of our business, contract manufacturing, the only
fluctuation directly associated with sales are commissions. Overall the
percentage will decrease as sales increase due to general and administrative
expenses being a specific value. Selling, general and administrative expenses
decreased from 24% of sales to 18% of sales for the comparable period last year.
<TABLE>
<CAPTION>
Three months ended
July 31
1997 1996
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<S> <C> <C>
Selling, general and administrative $ 358,245 $ 121,809
</TABLE>
Interest expense was primarily on loans from stockholders.
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FINANCIAL CONDITION
The Company's debt structure has significantly improved, the debt to
related parties has been accruing interest, but not consuming cash in debt
service. The Company has exchanged all but 50,000 shares of the preferred stock
and the accumulated dividends , on these preferred shares to common stock.
These shares and the accumulated dividends are convertible to 51,973 shares of
common stock, the remaining shareholder has indicated his intent to convert.
The Company exchanged $185,000 of Convertible Debentures, and its accrued
interest of $98,405 for 566,810 shares of common stock during the first quarter
of fiscal 1997, an additional 75,000 shares of common stock were sold to
generate cash to retire the remaining debenture and its accrued interest.
In July, the company issued twelve percent (12%) subordinated callable
notes in the amount of $190,000 due July 10, 1999. The funds were generated and
set aside for capital expenditures. A new IMA Model 40F intermittent motion
capsule filling machine was purchased to meet the growing demand of customers
wanting encapsulated products as opposed to compressed tablets. A new air
compressor has been ordered to meet the demand of compressed air needed to run
the new capsule machine and automated packaging line simultaneously.
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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.
September 13, 1997 /s/ Pauline G. Lee
Pauline G. Lee
Secretary and
Chief Accounting Officer
9
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
27 Financial Data Schedule
</TABLE>
