U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(mark one)
___X_ Quarterly report under Section 13 or 15 of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 1998.
_____ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
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)
6 Woodcross Drive, Columbia, South Carolina 29212
(Address of principal executive offices)
(Zip code)
(803) 407-3044
(Issuers 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 issuers
classes of common equity, as of the latest practicable date:
5,962,496 at .
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Advanced Medical Products Inc.
Balance Sheet
March 31,
1997 June 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash
$ 49,186 $ 50,938
Accounts Receivable (net of allowance for doubtful
Accounts of $29,360 and $30,954 respectively)
579,968 554,552
Inventory (Note 2)
540,818 512,812
Other Current Assets (Note 3)
128,007 57,168
Total Current Assets
1,297,979 1,175,470
Furniture and Equipment, Net
204,245 282,384
Product Software Costs, Net
58,720 90,078
Other Assets Deposits
8,512 8,512
Total Assets
1,569,457 1,556,444
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities:
Notes Payable (Note 5)
$ 402,615 $ 603,407
Accounts Payable
543,049 510,324
Current Portion Long-Term Debt (Note 6)
24,000 24,000
Accrued Wages and Commissions
107,912 89,949
Other Current Liabilities (Note 3)
233,172 254,961
Total Current Liabilities
1,300,748 1,482,641
Dividends Payable on Preferred Stock
148,015 61,860
Long-Term Liabilities:
Long-Term Debt, Net of Current
Portion (Note 6)
225,576 102,181
Total Liabilities
1,674,339 1,646,682
Stockholders Equity:
Class A Preferred Stock, no par value; authorized 4,000
shares; issued and outstanding 2,377 shares (Note 7)
2,289,410 2,289,410
Common Stock, $0.01 par value; authorized 7,000,000
shares, 5,962,495 shares issued and outstanding at
December 31, 1997 and 5,112,495 at June 30, 1997.
59,625 51,125
Additional Paid-In Capital
2,501,175 2,340,915
Accumulated Deficit
(4,955,092) (4,771,688)
Total Stockholders Equity
(104,883) (90,238)
Total Liabilities and Stockholders Equity
$ 1,569,457 $1,556,444
*The accompanying notes are an integral part of these financial
statements.
Advanced Medical Products Inc.
Statement of Operations and Accumulated Deficit
Three
Months Ended
March 31, 1998
March 31, 1997
(unaudited) (unaudited)
Net Sales
$ 616,092 $ 656,997
Cost of Sales
304,741 336,505
Gross Profit
311,351 320,492
Selling, General and Administrative
262,088 343,366
Research and Development
43,900 41,458
Interest Expenses
22,942 15,675
Income Before Income Taxes
( 17,059) ( 80,007)
Provision For Income Taxes
- -0- -0-
Net Income
( 17,059) ( 80,007)
Accumulated Deficit Beginning of Period $
(4,937,826) (4,382,487)
Accumulated Deficit End of Period
$ (4,955,593) $ (4,462,494)
Net Income (Loss) Applicable to Common Shares $ (
46,767) $ ( 109,720)
Earnings Per Share Data:
Net Income (Loss)
$ ( 0.01) $ ( 0.02)
Weighted Average Number of Common
Shares Outstanding
5,679,162 5,112,495
The accompanying notes are an integral part of these financial
statements.
Advanced Medical Products Inc.
Statement of Operations and Accumulated Deficit
Nine Months Ended
March 31, 1998
March 31, 1997
(unaudited) (unaudited)
Net Sales
$ 1,645,896 $ 2,165,840
Cost of Sales
817,789 1,094,840
Gross Profit
828,107 1,071,000
Selling, General and Administrative
809,664 1,248,727
Research and Development
119,839 160,950
Interest Expenses
81,901 33,041
Income Before Income Taxes
(183,198) (371,718)
Provision For Income Taxes
- -0- -0-
Net Income
(183,198) (371,718)
Accumulated Deficit Beginning of Period $
(4,826,104) $ (4,090,776)
Accumulated Deficit End of Period
$ (4,937,826) $ (4,462,494)
Net Income (Loss) Applicable to Common Shares $
(255,273) $ (456,256)
Earnings Per Share Data:
Net Income (Loss)
$ ( 0.04) $ (0.09)
Weighted Average Number of Common Shares Outstanding 5,395,829
4,912,130
The accompanying notes are an integral part of these financial
statements.
Advanced Medical Products Inc.
Statement of Cash Flows
Nine Months Ended
March 31, 1998
March. 31, 1997
(unaudited) (unaudited)
Cash flows from operating activities:
Net Income
$ ( 183,405) $ ( 371,718)
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Loss on disposal of fixed assets
- -0- 7,813
Depreciation and amortization
111,253 93,491
Bad debt expense
47,139 -0-
Provision for doubtful accounts
(1,595) 20,691
Change in assets and liabilities:
Accounts receivable
( 70,960) 123,204
Inventory
( 28,007) 18,775
Other assets
( 70,839) 57,644
Accounts payable
32,726 66,442
Other liabilities
( 13,826) ( 158,982)
Total adjustments
5,891 229,078
Net cash provided (used) by operating activities
( 177,514) ( 142,640)
Cash flows used by investing activities:
Capital expenditures
- -0- ( 54,722)
Proceeds from sale of equipment
- -0- 1,500
Capitalization of software costs
( 1,756) ( 41,365)
Net cash used by investing activities
( 1,756) ( 94,587)
Cash flows provided (used) by financing activities:
Proceeds from loan from stockholder
- -0- 100,000
Net proceeds from sale of common stock
257,898 -0-
Net proceeds (payments) on short term debt
( 50,792) 220,552
Payments on long-term debt
( 29,588) ( 38,616)
Net cash provided (used) by financing activities
177,518 281,936
Net increase (decrease) in cash
( 1,752) 44,709
Cash, beginning of period
50,938 14,631
Cash, end of period
$ 49,186 $ 59,340 Supplemental disclosures
of cash flow information:
Cash paid during the period for:
Interest
$ 68,822 $ 33,041
Income taxes
- -0- -0-
The accompanying notes are an integral part of these financial
statements.
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
principals 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
principals 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 nine months period
ended March 31, 1998 are not necessarily indicative of the
results that may be expected for fiscal year 1998. The
unaudited condensed financial statements should be read in
conjunction with the financial statements and footnotes
thereto included in the Companys annual report on Form 10-KSB
for the year ended June 30, 1997.
2. Inventory
March 31, 1997 June 30, 1997
Inventory consisted of:
(unaudited)
Raw materials and work in process
$ 315,834 $ 305,188
Finished goods
224,984 207,624
$ 540,818 $ 512,812
3. Other Current Assets
Prepaid expenses
$ 33,132 $ 41,041
Deposits current
4,962 4,962
Deferred taxes
9,914 9,914
Notes receivable
80,000 -0-
Advances
- -0- 1,250
$ 128,008 $ 57,168
Other Current Liabilities
Accrued royalties
$ 23,729 $ 39,593
Accrued vacation pay
15,132 25,362
Deferred service contract revenue
163,628 125,200
Warranty reserve
15,645 26,489
Accrued sales tax liability
12,548 25,084
Other
2,500 -0-
$ 233,172 $ 254,961
4. Related Party Transactions
Effective July 1, 1996, the Company entered into a 90 day loan
agreement with BIOTEL International (now owned by Carolina
Medical, Inc.) the Companys majority shareholder, under which
the Company borrowed $150,000 at 12 percent annual rate of
interest. This note, originally set to mature September 30,
1996 has subsequently been extended to December 31, 1999. At
March 31, 1998, $18,982 in interest was due, in addition to
the principle.
5. Short Term Debt
On October 21, 1996, the Company entered into an asset based
credit agreement with Emergent Financial Corporation of
Atlanta, Georgia. Under this agreement, the Company may
borrow 80 percent of eligible accounts receivable (as defined
in the agreement) and 30 percent of eligible inventory (as
defined in the agreement) up to a total loan balance of
$750,000. Interest is charged at an annual percentage rate of
Prime plus 2% as defined by NationsBank of Georgia, N.A. and
monthly fees as a percentage of the balance outstanding are
0.75% of the average daily balance. As of March 31, 1998, $
383,633 was borrowed by the Company under this agreement.
6. Long-Term Debt
On March 2, 1996, the Company restructured eight operating
leases and its short-term note with Onbank of Syracuse, New
York into one long-term note. The note will be repaid in 48
monthly installments of $2,000, accrued interest at 11
percent, and is secured by furniture, fixtures and equipment.
The balance as of March 31, 1998 was $ 43,576.
On June 1, 1996, the Company restructured five operating
leases with Syracuse Supply Company of Syracuse, New York into
one short-term note. The note was repaid in 12 monthly
installments of $913, accrued interest at 11 percent and was
secured by equipment, furniture and fixtures. The balance was
repaid prior to March 31, 1998.
7. Capital Stock Transactions
On August 29, 1996, the Company was released from a fifteen-
year lease with SCANA, the Companys landlord. SCANA received
160 shares of the Companys Class A Preferred Stock as payment
in full of the delinquent lease payments of approximately
$160,000.
Nishimoto Sangyo, one of the Companys preferred stockholder,
entered into an agreement to convert $102,000 of their accrued
dividend and interest into 300,000 shares of common stock at
$0.34 per share as of March 31, 1996 which shares were issued
by December 31, 1996.
As of January 31, 1997 Nishimoto Sangyo converted $104,000 in
Preferred Stock dividends due December 31, 1996 into 104
additional shares of Preferred Stock.
On October 20, 1997 the Company entered into a Stock Purchase
Agreement with Carolina Medical, Inc., selling an additional
850,000 shares of common stock of Advanced Medical Products,
Inc. to Carolina Medical, Inc. for $263,500. Of this amount,
$183,500 was paid to the Company in November and the balance was
structured as a note, which was paid by April 30, 1998. This
stock purchase increased Carolina Medicals ownership in the
Company to 3,000,000 shares or 50.3 percent of the 5,962,496
issued and outstanding common stock shares.
8. Earnings Per Share
Earnings per common share were computed by dividing net income
by the weighted average number of common shares outstanding
during the period. Earnings per share did not include the
impact of outstanding options since it was not significant.
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS
Results of Operations
Net sales of $616,092 and $1,645,896 for the quarter and nine
months ended March 31, 1998 represent a 6% and 24% decrease
from sales of $656,997 and $2,165,840 in the comparable
periods of 1997. These decreases were due to lower sales to
existing OEM/International customers as well as to domestic
customers.
Gross profit margins on sales were 50.5% of net sales for the
quarter and 50.3% for the nine months ended March 31, 1998.
The improvement from a gross margin of approximately 49%
reported for the first nine months of 1997 resulted from lower
unabsorbed fixed costs. Selling, general and administrative
expenses of $262,088 for the quarter and $809,664 for the
nine months ended March 31, 1998 were 42.5% and 49.2% of net
sales compared to expenses of $343,366 and $1,248,727 or 52.3%
and 57.7 % of net sales for the same periods last year. Total
selling, general and administrative expenses were
approximately 24% lower than they were in the third quarter
and 35% lower than in the first nine months of fiscal 1997.
This is due to lower commissions and continuing efforts to cut
and control costs company-wide.
Research and development costs during the first nine months of
fiscal 1998 were reduced 25% from last year. This is a result
of efforts to decrease expenses company-wide.
Net losses for the quarter and nine months ended March 31,
1998 were $17,059 and $183,198 respectively compared to losses
of $80,007 and $371,718 for the same periods last year. These
substantially reduced losses despite lower sales are a direct
result of efforts to reduce costs company-wide. Interest
expenses of $22,942 for the third quarter of 1998 and $81,901
for the first nine months of 1998 were up substantially from
the $15,675 and $33,041 spent on interest expense for the
corresponding quarters last year. These higher interest
expenses are a direct result of higher borrowing levels under
the Company's credit line with Emergent Financial Group.
During the first nine months of fiscal 1998, accounts
receivable increased by $25,416 and inventory increased by
$28,006. Accounts payable increased by $22,725.
Liquidity and Capital Resources
Operating activities used $177,514 of cash during the nine
months ended March 31, 1998. This compared to $142,640 used
during the nine months of fiscal 1997. However, capital
expenditures used only $1,756 during the first nine months of
fiscal 1998 compared to $94,587 in capital expenditures during
the first nine months of 1997.
On October 20, 1997 the Company entered into a Stock Purchase
Agreement with Carolina Medical, Inc., selling an additional
850,000 shares of common stock of Advanced Medical Products,
Inc. to Carolina Medical, Inc. for $263,500. Of this amount,
$183,500 was paid to the Company in November and the balance was
structured as a note, which was paid April 30, 1998. This stock
purchase increased Carolina Medicals ownership in the Company
to 3,000,000 shares or 50.3 percent of the 5,962,496 issued and
outstanding common stock shares.
Since December 31, 1997 the Company has been in violation of its
preferred stock agreements with Nishimoto-Sangyo Company, Ltd.
and SCANA Corporation, the Companys two preferred stockholders.
These two preferred stock agreements require that an annual
dividend of $50 per $1,000 of the face value of the preferred
stock be declared and paid at the end of each calendar year.
However, the Company had deficits in both retained earnings and
stockholders equity at December 31, 1997 and therefore under
Delaware law cannot legally declare a stock dividend. Nishimoto-
Sangyo has been unwilling to convert unpaid dividends into
additional common or preferred shares of Advanced Medical, as
they have done in prior years, but has indicated a willingness
to sell their common and preferred stock in the Company in
exchange for shares of Carolina Medical, Inc. If that
transaction were to be consummated, then Carolina Medical would
own 55.3% of the common stock and 93.3% of the preferred stock
of the Company issued and outstanding.
The Company believes that internally generated funds, the
revolving credit agreement with Emergent Financial Group, the
loan agreement with Carolina Medical, and the cash received from
Carolina Medical for the purchase of an additional 850,000
shares of common stock, should provide sufficient working
capital to meet immediate needs, but not sufficient to meet
longer term working capital requirements. The Company is
actively seeking additional capital sources to provide long term
debt or equity funding. The Company has had discussions with
Carolina Medical and others regarding possible additional
investments in the Company, or a possible share exchange.
However there is no assurance that existing shareholders will
provide the Company with any additional funding, or that other
sources of funding will be available if and when needed. In
order to improve its cash flow position, the Company has
undertaken steps internally to improve gross margins and fixed
costs.
The Company currently does not have specific plans for any
major capital expenditures in fiscal 1998.
PART II OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K No reports on Form 8-K have
been filed during the quarter for which this
report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Advanced Medical Products
Inc.
(Registrant)
By:
___________________________
George L. Down,
President
Dated:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 49,186
<SECURITIES> 0
<RECEIVABLES> 609,328
<ALLOWANCES> (29,360)
<INVENTORY> 540,818
<CURRENT-ASSETS> 1,297,979
<PP&E> 262,965
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,569,457
<CURRENT-LIABILITIES> 1,300,748
<BONDS> 0
0
2,289,410
<COMMON> 59,625
<OTHER-SE> (2,453,917)
<TOTAL-LIABILITY-AND-EQUITY> 1,569,457
<SALES> 616,092
<TOTAL-REVENUES> 1,645,896
<CGS> 304,741
<TOTAL-COSTS> 817,789
<OTHER-EXPENSES> 929,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,901
<INCOME-PRETAX> (183,198)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,198)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
