U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(mark one)
X Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1995
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act
For the transition period from to
Commission file number 0-16341
Advanced Medical Products Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 16-1284228
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
111 Research Drive, Columbia, South Carolina 29203
(Address of Principal Executive Offices) (Zip Code)
(803) 935-0906
Issuer's Telephone Number, Including Area Code
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: $2,688,576 at February
14, 1996
(1)
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
ADVANCED MEDICAL PRODUCTS INC.
BALANCE SHEET
Dec. 31, 1995 June 30, 1995
(unaudited) (audited)
ASSETS
Current Assets:
Cash $ 3,394 $ 32,111
Accounts receivable
(net of allowance for doubtful
accounts of $56,772 and
$66,525 respectively) 688,564 643,153
Refundable income taxes 48,089 48,089
Inventory (Note 2) 1,028,908 1,208,359
Other current assets 183,900 208,589
Total current assets 1,952,855 2,140,301
Furniture and equipment, net 298,420 301,684
Product software costs, net 80,380 89,494
Other Assets 6,926 6,926
Total Assets $2,338,581 $2,538,405
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash issued against future deposit 68,297 -0-
Current portion of long-term debt $ 44,622 $ 64,402
Accounts payable 1,027,749 1,053,946
Accrued wages and commissions 146,340 93,287
Other current liabilities 361,292 237,773
Total current liabilities 1,648,300 1,449,408
Dividend payable 100,000 100,000
Class A preferred stock, no par value;
authorized 4,000 shares; issued and
outstanding 2,000 shares; subject to
mandatory redemption in the amount
of $2,000,000 by October 2002 1,910,004 1,903,524
Total long-term liabilities 2,010,004 2,003,524
Total liabilities 3,658,304 3,452,932
Stockholders' equity:
Common stock, $.01 par value;
authorized 5,000,000 shares,
2,688,576 shares issued and
outstanding at December 31, 1995
and 2,646,076 June 30, 1995. 26,632 27,042
Additional paid in capital 2,099,874 2,194,415
Accumulated deficit (3,446,229) (3,040,635)
(2)
ADVANCED MEDICAL PRODUCTS INC.
BALANCE SHEET CONTINUED
Dec. 31, 1995 June 30 1995
(unaudited) (audited)
Less notes receivable for common $ -0- $( 67,598)
stock (Note 3)
Less treasury stock, at cost, -0-
shares at December 31, 1995 and
15,615 shares at June 30, 1995. (Note 4) -0- ( 27,751)
Total stockholders' deficit (1,319,723) ( 914,527)
Total liabilities and stockholders'
deficit $2,338,581 $2,538,405
========== ==========
The accompanying notes are an integral part of these financial statements.
(3)
ADVANCED MEDICAL PRODUCTS INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
Six Months Ended
Dec. 31, 1995 Dec. 30 , 1994
(unaudited) (unaudited)
Net sales $2,385,736 $2,689,827
Cost of sales 1,274,846 1,336,346
Gross profit 1,110,890 1,353,481
Selling, general and
administrative 1,324,601 1,557,865
Research and development 181,844 219,256
Interest expenses 3,557 47,990
Income (loss) before income taxes (399,112) (471,630)
Provision for income taxes 0 0
Net income (loss) (399,112) (471,630)
Retained deficit - beginning of period (3,040,635) (1,038,946)
Accretion of redeemable preferred
stock ( 6,482) ( 6,437)
Accumulated deficit - end of period $(3,446,229) $(1,517,013)
========== ==========
Net income (loss) applicable to
common shares $( 455,594) $( 528,367)
========== ==========
Earnings per common share data:
Net income (loss) $ (.17) (.23)
========== ==========
Weighted average number of common
shares outstanding 2,673,225 2,662,859
The accompanying notes are an integral part of these financial statements.
(4)
ADVANCED MEDICAL PRODUCTS INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
Three Months Ended
Dec. 31, 1995 Dec. 30 , 1994
(unaudited) (unaudited)
Net sales $1,072,857 $1,318,561
Cost of sales 650,991 656,344
Gross profit 421,866 662,217
Selling, general and
administrative 757,335 817,589
Research and development 115,415 107,658
Interest expenses 1,685 24,722
Income (loss) before income taxes (452,569) ( 287,752)
Provision for income taxes 0 0
Net income (loss) (452,569) ( 287,752)
Retained deficit - beginning of period (2,990,419) (1,226,042)
Accretion of redeemable preferred
stock ( 3,241) ( 3,219)
Accumulated deficit - end of period $(3,446,229) $(1,517,013)
========== ==========
Net income (loss) applicable to
common shares $( 480,810) $( 315,971)
========== ==========
Earnings per common share data:
Net income (loss) $ (.17) (.13)
========== ==========
weighted average number of common
shares outstanding 2,673,225 2,664,026
The accompanying notes are an integral part of these financial statements.
(5)
ADVANCED MEDICAL PRODUCTS INC.
STATEMENT OF CASH FLOWS
Six Months Ended
Dec. 31, 1995 Dec. 30, 1994
(unaudited) (unaudited)
Cash Flows Used By Operating Activities:
Net Loss $( 399,112) $ (471,630)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 48,648 50,956
Bad Debt Expense 394 -0-
Provision for doubtful accounts ( 9,753) 82,004
Change in assets and liabilities:
Accounts receivable ( 35,659) ( 69,878)
Inventory 179,451 188,245
Other assets 24,689 ( 47,048)
Accounts payable ( 26,197) 216,152
Other current liabilities 176,573 ( 45,849)
Total adjustments 358,146 374,582
Net cash used by operating activities ( 40,966) ( 97,048)
Cash flows used by investing activities:
Capital expenditures ( 36,268) ( 38,847)
Capitalization of software costs -0- ( 15,300)
Net cash used by investing activities ( 36,268) ( 54,147)
Cash flow used by financing activities:
Payments on long-term debt ( 19,780) ( 28,417)
Purchases of common stock -0- -0-
Issuance of common stock awards -0- 2,500
Net cash used by financing activities ( 19,780) ( 25,917)
Net (decrease) increase in cash and
cash equivalents ( 97,014) (177,112)
Cash and cash equivalents at
beginning of period 32,111 1,196,951
Cash and cash equivalents at
end of period $ ( 64,903) $1,019,839
========== ==========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 3,557 $ 47,990
Income taxes 0 0
The accompanying notes are an integral part of these financial statements.
(6)
ADVANCED MEDICAL PRODUCTS INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
six month period ended December 31, 1995 are not necessarily
indicative of the results that may be expected for fiscal
year 1996. The unaudited condensed financial statements
should be read in conjunction with the financial statements
and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended June 30, 1995.
2. Inventory
Inventory consisted of:
Dec. 31, 1995 June 30, 1995
(unaudited) (audited)
Raw Material and
work in process $ 534,210 $ 579,903
Finished Goods 494,698 628,456
$1,028,908 $1,208,359
========== ==========
3. Note Receivable - Common Stock
The note receivable - common stock of $67,598 was written
off against common stock and additional paid in capital. The
corresponding $9,892 interest receivable was written off
as a bad debt at December 31, 1995.
4. Treasury Stock
15,615 shares of treasury stock with a cost of $27,751 were
retired at December 31, 1995.
5. Earnings Per Share
Earnings per common share were computed by dividing net
income (loss) by the weighted average number of common
shares outstanding during the period. Earnings per share
did not include the impact of the outstanding options since
it was not significant.
(7)
6. Subsequent Events
On January 12, 1996 Carolina Medical, Inc., a privately held
medical device manufacturing company located in King, North
Carolina, purchased 750,000 shares or 21.81% of Advanced
Medical Products, Inc.'s authorized but unissued common
stock for $150,000. Carolina Medical or its affiliate
BIOTEL International, Inc., a holding company that owns a
majority interest in Carolina Medical's stock, has agreed to
purchase an additional 1,400,000 shares of Advanced
Medical's common stock within 105 days for an additional
$280,000, subject to certain defined terms and conditions.
In the event Carolina Medical (or BIOTEL) purchases the
additional 1,400,000 shares of common stock, Carolina
Medical will the beneficially own an aggregate of 2,150,000
shares, or 44.44%, of the Company's common stock.
In addition, Advanced Medical entered into a Licensing
Agreement with Carolina Medical to utilize the technology
embodied in Advanced Medical's Ultra PCI portable hand-
held ultrasound product line for other applications that
will not be directly competitive with Advanced Medical's
current portable applications.
Clarence P. Groff resigned as the Company's President,
Treasurer, Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and member of the Company's
Board of Directors. Ronald G. Moyer, Chairman and Chief
Executive Officer of Carolina Medical, was elected as the
Company's President and Treasurer at a meeting of the Board
of Directors on January 25, 1996.
(8)
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net sales of $2,385,736 for the six months ended December 31,
1995 represent a 12% decrease from sales of $2,689,827 in the
comparable six month period ended December 30, 1994. Net sales
of $1,072,857 for the second quarter of fiscal 1996 represents a
19% decrease in sales from the comparable quarter in 1994. This
decrease is primarily due to reductions in the Company's
marketing and lead generation programs.
For the six months ended December 31, 1995 the Company's gross
profit margin decreased to 46% from 50% of net sales for the
period ended December 30, 1994. The gross profit margin
decreased from 50% of net sales in the second quarter of fiscal
1995 to 39% of net sales in the second quarter of fiscal 1996.
This decrease is primarily due to premiums paid for parts.
Selling, general and administrative expenses of $1,324,601 for
the six months ended December 31, 1995 were 55% of net sales for
the period as compared to expenses of $1,557,865 or 57% of net
sales for the same period last year. For the three months ended
December 31, 1995 selling, general and administrative expenses of
$757,335 represented 70% of net sales compared with $817,589 or
62% for the corresponding quarter last year. Although total
expenses have been reduced, spreading the fixed expenses over
lower levels of sales, coupled with high commission costs
resulted in excessive costs as a percent of sales. Additional
steps have been taken in January to further reduce fixed costs.
Research and development costs during the first six months of
fiscal 1996 decreased 18% over the comparable period in fiscal
1995. During the second quarter of fiscal 1996, research and
development costs increased 7% from the second quarter last year.
These differences are primarily due to upgrade expenses and the
completion of the phase in of the Spectra ECG and development of
the Ultra PCI.
Net loss for the six months December 31, 1995 decreased from
$(471,630) in the six months ended December 31, 1994 to
$(399,112). For the quarter ended December 31, 1995 the net loss
increased to $(452,569) from $(287,752) for the same period last
year. The net loss for the first six months and the second
quarter of fiscal 1996 is primarily a result of the increase in
expenses associated with an expanded internal sales force, write-
offs of bad debts, write-down of inventory and premiums paid for
parts.
During the first six months of fiscal 1996, accounts receivable
increased from $643,153 at June 30, 1995 to $688,564. Inventory
over this period decreased from $1,208,359 to $1,028,908. This
decrease is a result of efforts to reduce inventory levels.
(9)
LIQUIDITY AND CAPITAL RESOURCES
Operating activities used $40,966 of cash during the six months
ended December 31, 1995 compared with $97,048 used during the
first six months of fiscal 1995. In the first six months of
fiscal 1996, $36,268 was used for capital expenditures, compared
to $54,147 for the same period last year.
The Company is a party to a loan agreement, pursuant to which a
Syracuse, New York bank has extended credit and loaned funds to
the Company. The bank loaned the Company $250,000 with interest
at 11%, $44,622 of which was outstanding as of December 31, 1995.
The loan is subject to the provisions of a five year term loan
agreement.
The company was released from a factoring agreement with
Cambridge Capital Management, Inc. of Boca Raton, Florida. The
Company has entered into a new factoring agreement with Global
Acceptance Corporation of Detroit, Michigan ("Global") pursuant
to which Global has agreed to advance 75% less $100 of the
company's eligible accounts receivable. Global will receive a
discount as to each receivable [ranging from 3.75% to 15%
(subject to a $25 minimum)] depending upon the number of days
that elapse between the date the receivable is factored and the
date Global collects the receivable. The company's obligations
under the factoring agreement were personally guaranteed by
Clarence P. Groff, former President of the Company. The Company
had no outstanding invoices factored with Global at December 31,
1995.
The Company entered into an agreement on January 12, 1996 with
Carolina Medical, Inc., a privately held corporation located in
King, North Carolina to sell 750,000 shares or 21.81% of Advanced
Medical's authorized but unissued common stock for $150,000.
Carolina Medical or its affiliate, BIOTEL International, Inc., a
holding company that owns a majority interest in Carolina
Medical's common stock has agreed, subject to certain terms and
conditions, to purchase an additional 1,400,000 shares of
Advanced Medical's common stock within 105 days for an additional
$280,000. In the event the foregoing occurs, Carolina Medical
will beneficially own an aggregate of 2,150,000 shares, or 44.44%
of the Company's outstanding common stock.
Although the Company's auditors, BDO Seidman issued a "going
concern opinion" for the audit period ending June 30, 1995,
the Company believes that internally generated funds, existing
borrowing resources, the recent capital investment by Carolina
Medical, as well as, the proposed additional investment by either
Carolina Medical Inc.or BIOTEL International, Inc.should provide
sufficient working capital to meet immediate commitments.
However, in order to improve its current cash flow position, the
Company has undertaken internal initiatives including steps to
improve gross margins, reduce inventory levels, reduce accounts
receivable, and reduce fixed costs.
(10)
The Company does not currently have specific plans for major
capital expenditures in fiscal 1996. Should needs arise, the
Company may consider additional capital sources to obtain
funding. There is no assurance any additional financing, if
required, will be available on terms acceptable to the Company.
(11)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - No exhibits were filed during the quarter
for which this report is filed; however, since December
31, 1995 two exhibits, (a) January 12, 1996 Agreements
Relating to Change in Control of the Company and (b)
Intellectual Property License Agreement dated January
12, 1996, which were filed January 26, 1996 with Form
8-K to report the Changes of Control of the Registrant.
(b) Reports on Form 8-K - No reports on form 8-K were filed
during the quarter for which this Report is filed;
however, a Form 8-K was filed on January 26, 1996 to
report the Change of Control of the Registrant that
took place on January 12, 1996.
(12)
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Medical Products Inc.
(Registrant)
By:s/ Ronald G. Moyer
Ronald G. Moyer
President
Dated: February 14, 1996
(13)
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Medical Products Inc.
(Registrant)
By:
Ronald G. Moyer
President
Dated: February 14, 1996
(14)
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<PERIOD-END> DEC-31-1995
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<RECEIVABLES> 745,336
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1,910,004
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