<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 October 31, 1999
[ ] 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 October 31, 1999 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>
October 31,
ASSETS 1999
-----------
<S> <C>
Cash $ 110,513
Trade Accounts Receivable, less
allowance for doubtful accounts of $176,322 297,864
Inventory 307,242
Other Current Assets 82,395
-----------
Total Current Assets 798,014
Property, plant and equipment 1,673,193
Less accumulated depreciation 635,358
-----------
Net property, plant and equipment 1,037,835
Land 5,798
Intangibles 36,676
Less accumulated amortization 34,998
-----------
Net intangibles 1,678
Total assets $ 1,843,325
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable to related parties $ 104,390
Accounts Payable 592,828
Accrued Liabilities 105,245
Customer Deposits 186,634
-----------
Total current liabilities 989,097
Long Term Debt 570,000
-----------
Total Liabilities 1,559,097
Common stock 31,458
Additional paid-in capital 3,219,379
Accumulated deficit (2,966,609)
-----------
Stockholders' equity 284,228
-----------
Total liabilities and stockholders' equity $ 1,843,325
===========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
SUMMA RX LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
October 31 October 31
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 942,592 $ 687,280 $ 1,513,148 $ 1,417,305
Cost of Goods sold 794,447 473,756 1,191,259 888,456
----------- ----------- ----------- -----------
Gross Profit 148,145 213,524 321,889 528,849
Selling, general and administrative 416,583 213,792 549,831 486,367
----------- ----------- ----------- -----------
Operating profit (268,438) (268) (227,942) 42,482
Other income (expense) (25,075) (18,369) (37,417) (36,831)
----------- ----------- ----------- -----------
Net Income (Loss) $ (293,513) $ (18,637) $ (265,359) $ 5,651
=========== =========== =========== ===========
Basic earnings (loss) per share (.09) (.01) (.08) .00
=========== =========== =========== ===========
Weighted averages shares outstanding 3,145,838 3,145,838 3,145,838 3,145,838
----------- ----------- ----------- -----------
Fully diluted earnings (loss) per share (.09) (.01) (.08) .00
=========== =========== =========== ===========
Fully diluted shares outstanding 3,145,838 4,372,502 3,145,838 4,372,502
----------- ----------- ----------- -----------
See accompanying notes to the financial statements.
</TABLE>
4
<PAGE> 5
SUMMA RX LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
October 31
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 1,441,561 $ 1,397,508
Cash paid to suppliers and employees (1,525,629) (1,359,514)
Interest paid (37,417) (36,831)
----------- -----------
Net cash used in operating activities (121,485) 1,163
Cash flows from investing activities:
Capital expenditures (36,622) (168,673)
Cash effect of stock purchase 0 0
----------- -----------
Net cash provided by (used in) investing activities (36,622) (168,673)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 0
Proceeds from issuance of common stock 0 0
----------- -----------
Net cash provided by financing activities 0 0
----------- -----------
Net increase (decrease) in cash (158,107) (167,510)
Cash at beginning of year 268,620 415,227
----------- -----------
Cash at end of year $ 110,513 $ 247,717
=========== ===========
Reconciliation of net loss to net cash used in operating activities:
Net profit (loss) $ (265,359) $ 5,651
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 51,644 46,596
Changes in assets and liabilities:
Accounts receivable (116,765) (24,037)
Inventories (111,713) (44,341)
Other current assets (2,840) 7,655
Accounts payable and accrued expenses 323,548 9,639
----------- -----------
Net cash used in operating activities $ (121,485) $ 1,163
=========== ===========
</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 Rx Laboratories, Inc. ("Summa") was formed as a Texas sole proprietorship
in 1972 and was incorporated in the State of Texas in October 1976, as Dews
Laboratories, Inc. In November 1987, Dews was merged into a Delaware corporation
and was renamed Summa Rx Laboratories, Inc.
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,
approximately 45 miles west of the Dallas/Fort Worth metropolitan area.
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 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.
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 October 31, 1999 and 50,000 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 October 31, 1999 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 six-months periods ended October 31,
1999 and 1998. 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.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Sales for the second quarter increased 37% when compared to the second quarter
of last year. Sales increased 6% when compared to the six-month period in 1998.
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 Six months
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 942,592 $ 687,280 $1,513,148 $1,417,305
</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 increased from 68% to 84% and from 63% to
79% for the comparable prior periods
<TABLE>
<CAPTION>
Three months Six months
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cost of Goods $ 794,447 $ 473,756 $1,191,259 $ 888,456
</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 increased from 14% to 38% and from
14% to 30% of sales respectfully for the comparable periods last year. Of the
increase during the three-month period 26% and 19% 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 decreased from 17%
to 6% and from 20% to 6% of sales respectfully for the comparable periods last
year.
<TABLE>
<CAPTION>
Three months Six months
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Selling, general and administrative $ 416,583 $ 213,792 $ 549,831 $ 486,367
</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.
December 15, 1999 /s/ Pauline G. Lee
Pauline G. Lee
Secretary and
Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 FINANCIAL DATA SCHEDULE
</TABLE>
