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 December 31, 1997.
_____ 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
Dec. 31, 1997
June 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $
26,144 $ 50,938
Accounts Receivable (net of allowance for doubtful
Accounts of $19,276 and $30,954 respectively)
392,286 554,552
Inventory (Note 2)
516,203 512,812
Other Current Assets (Note 3)
119,296 57,168
Total Current Assets
1,039,056 1,175,470
Furniture and Equipment, Net
230,423 282,384
Product Software Costs, Net
69,626 90,078
Other Assets Deposits
8,512 8,512
Total Assets
1,362,491 1,556,444
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities:
Notes Payable (Note 5)
$ 351,809 $ 603,407
Accounts Payable
413,815 510,324
Current Portion Long-Term Debt (Note 6)
24,000 24,000
Accrued Wages and Commissions
73,854 89,949
Other Current Liabilities (Note 4)
208,654 254,961
Total Current Liabilities
1,072,132 1,482,641
Dividends Payable on Preferred Stock
121,288 61,860
Long-Term Liabilities:
Long-Term Debt, Net of Current
Portion (Note 6)
226,973 102,181
Total Liabilities
1,420,395 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
2,530,888 2,340,915
Accumulated Deficit
(4,937,826) (4,771,688)
Total Stockholders Equity
(57,904) (90,238)
Total Liabilities and Stockholders Equity
$ 1,362,491 $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
Dec. 31, 1997
Dec. 31, 1996
(unaudited) (unaudited)
Net Sales
$ 500,466 $ 715,155
Cost of Sales
242,561 457,022
Gross Profit
257,905 258,133
Selling, General and Administrative
287,825 493,378
Research and Development
49,784 64,340
Interest Expenses
32,018 12,144
Income Before Income Taxes
( 111,722) ( 311,729)
Provision For Income Taxes
- -0- -0-
Net Income
( 111,722) ( 311,729)
Accumulated Deficit Beginning of Period
(4,826,104) (4,070,758)
Accumulated Deficit End of Period $
(4,937,826) $ (4,382,487)
Net Income (Loss) Applicable to Common Shares $
(141,435) $ ( 340,142)
Earnings Per Share Data:
Net Income (Loss)
$ ( 0.02) $ ( 0.07)
Weighted Average Number of Common
Shares Outstanding
5,679,162 4,815,756
The accompanying notes are an integral part of these financial statements.
Advanced Medical Products Inc.
Statement of Operations and Accumulated Deficit
Six Months Ended
Dec. 31, 1997
Dec. 31, 1996
(unaudited) (unaudited)
Net Sales
$ 1,029,804 $ 1,508,844
Cost of Sales
513,048 758,336
Gross Profit
516,756 750,508
Selling, General and Administrative
547,576 906,855
Research and Development
75,939 119,493
Interest Expenses
59,380 15,871
Income Before Income Taxes
(166,139) (291,711)
Provision For Income Taxes
- -0- -0-
Net Income
(166,139) (291,711)
Accumulated Deficit Beginning of Period $
(4,826,104) $ (4,090,776)
Accumulated Deficit End of Period $
(4,937,826) $ (4,382,487)
Net Income (Loss) Applicable to Common Shares $
(225,565) $ (346,536)
Earnings Per Share Data:
Net Income (Loss)
$ ( 0.04) $ (0.07)
Weighted Average Number of Common
Shares Outstanding
5,395,829 4,814,126
The accompanying notes are an integral part of these financial statements.
Advanced Medical Products Inc.
Statement of Cash Flows
Six
Months Ended
Dec. 31, 1997
Dec. 31, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Net Income
$ ( 166,139) $ ( 291,711)
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
74,169 58,748
Bad debt expense
42,000 12,000
Provision for doubtful accounts
(11,678) ( 20,625)
Change in assets and liabilities:
Accounts receivable
131,944 47,488
Inventory
( 3,392) ( 1,899)
Refundable income taxes
- -0- 58,940
Other current assets
( 62,128) ( 16,076)
Other assets
- -0- ( 4,480)
Accounts payable
( 96,509) ( 14,942)
Other current liabilities
( 62,402) ( 120,633)
Total adjustments
26,878 ( 6,334)
Net cash provided (used) by operating activities (
154,135) ( 285,377)
Cash flows used by investing activities:
Capital expenditures
- -0- ( 54,161)
Proceeds from sale of equipment
- -0- 1,500
Capitalization of software costs
( 1,756) ( 24,860)
Net cash used by investing activities
( 1,756) ( 77,521)
Cash flows provided (used) by financing activities:
Proceeds from loan from stockholder
- -0- 150,000
Net proceeds from sale of common stock
257,898 -0-
Net proceeds (payments) on short term debt (
101,598) 236,841
Payments on long-term debt
( 25,203) ( 19,370)
Net cash provided (used) by financing activities
131,097 367,471
Net increase (decrease) in cash
( 24,794) 4,573
Cash, beginning of period
50,938 14,631
Cash, end of period
$ 26,144 $ 19,204
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest
$ 50,380 $ 15,871
Income taxes
- -0- -0-
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 six
month period ended December 31, 1997 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
Dec. 31, 1997 June 30, 1997
Inventory consisted of: (unaudited)
(audited)
Raw materials and work in process $
304,515 $ 305,188
Finished goods
211,688 207,624
$ 516,756 $ 512,812
3. Other Current Assets
Prepaid expenses
$ 24,420 $ 41,041
Deposits current
4,962 4,962
Deferred taxes
9,914 9,914
Notes receivable
80,000 -0-
Advances
- -0- 1,250
$ 119,296 $ 57,168
Other Current Liabilities
Accrued royalties
$ 32,017 $ 39,593
Accrued vacation pay
14,858 25,362
Deferred service contract revenue
128,055 125,200
Warranty reserve
18,546 26,489
Accrued sales tax liability
12,678 25,084
Other
2,500 -0-
$ 208,654 $ 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 December 31, 1997, $14,482 in
interest was due, in addition to the principle.
5. 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 December 31,
1997 was $ 47,960.
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 December
31, 1997.
6. 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.
7. Subsequent Events
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 December 31, 1997, $ 337,327 was borrowed by the Company under
this agreement.
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 $500,466 and $1,029,804 for the quarter and six months
ended December 31, 1997 represent a 30% and 32% decrease from sales
of $751,155 and $1,508,844 in the comparable periods of 1996.
These decreases were due to lower sales to existing
OEM/International customers, as well as to domestic customers.
Gross profit margins on sales were 51.5% of net sales for the
quarter and 50.2% for the six months ended December 31, 1997. The
inprovement from a 49.7% gross margin reported for the first six
months of 1996 resulted from lower unabsorbed fixed costs despite
the lower level of sales. Selling, general and administrative
expenses of $287,825 for the quarter and $547,576 for the six
months ended December 31, 1997 were 57.4% and 53.2% of net sales
compared to expenses of $493,378 and $906,000 or 69% and 60.1 % of
net sales for the same periods last year. Total selling, general
and administrative expenses were approximately 40% lower than they
were in the second quarter and first half of fiscal 1996. This is
due to lower commissions and efforts to cut and control costs
company wide.
Research and development costs during the second quarter and first
six months of fiscal 1997 were reduced 22.7% and 36.9% respectively
from last year. This is a result of efforts to decrease expenses
company-wide.
Net losses for the quarter and six months ended December 31, 1997
were $111,722 and $166,139 respectively compared to losses of
$311,729 and $291,711 for the same periods last year. These
substantially reduced losses despite substantially lower sales are a
direct result of efforts to reduce costs company-wide.
During the first six months of fiscal 1997, accounts receivable
decreased from $554,552 at June 30, 1997 to $392,286 at December 31,
1997. Inventory increased slightly from $512,812 to $516,203 at
December 31, 1997.
Liquidity and Capital Resources
Operating activities provided $92,676 and used $154,135 of cash
during the quarter and six months ended December 31, 1997. This
compared to $68,412 used during the quarter and $285,377 used during
the six months ended December 31, 1996. In the second quarter and
first six months of fiscal 1997, capital expenditures were $1,759
compared to $19,609 and $77,521 spent for the same periods last
year.
Subsequent to quarter ended September 30, 1996, the Company was
released from a factoring agreement with Global Acceptance
Corporation of Ann Arbor, Michigan and entered into an asset based
credit agreement with Emergent Financial Corporation of Atlanta,
Georgia (see Note 8 to the financial statements). Interest costs
have increased because of debt incurred.
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.
Since December 31, 1997 the Company has been in violation of its
preferred stock agreements with Nishimoto-Sangyo Company, Ltd. and
SCANA Corporation, the Company's 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:
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<CASH> 26,144
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2,289,410
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<CGS> 513,048
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