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 September 30, 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 ______ 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
Sept. 30, 1997
June 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $
31,972 $ 50,938
Accounts Receivable (net of allowance for doubtful
Accounts of $15,820 and $30,954 respectively)
408,414 554,552
Inventory (Note 2)
551,493 512,812
Other Current Assets (Note 3)
23,590 57,168
Total Current Assets
1,015,469 1,175,470
Furniture and Equipment, Net
256,601 282,384
Product Software Costs, Net
80,532 90,078
Other Assets Deposits
8,.512 8,512
Total Assets
1,361,114 1,556,444
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities:
Notes Payable (Note 5)
$ 509,360 $ 603,407
Accounts Payable
527,117 510,324
Current Portion Long-Term Debt (Note 6)
24,000 24,000
Accrued Wages and Commissions
84,292 89,949
Other Current Liabilities (Note 4)
212,795 254,961
Total Current Liabilities
1,357,564 1,482,641
Dividends Payable on Preferred Stock
91,573 61,860
Long-Term Liabilities:
Long-Term Debt, Net of Current
Portion (Note 6)
86,345 102,181
Total Liabilities
1,535,482 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, 5,112,495 shares issued and outstanding at
September 30, 1997 and 5,112,495 at June 30, 1997.
51,125 51,125
Additional Paid-In Capital
2,311,202 2,340,915
Accumulated Deficit
(4,826,105) (4,771,688)
Total Stockholders Equity
(174,368) (90,238)
Total Liabilities and Stockholders Equity
$1,361,114 $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
Sept. 30, 1997
Sept. 30, 1996
(unaudited) (unaudited)
Net Sales
$ 529,338 $ 793,689
Cost of Sales
270,487 301,314
Gross Profit
258,851 492,375
Selling, General and Administrative
259,751 413,477
Research and Development
26,155 55,153
Interest Expenses
27,362 3,727
Income Before Income Taxes
(54,417) 20,018
Provision For Income Taxes
- -0- -0-
Net Income
(54,417) 20,018
Accumulated Deficit Beginning of Period
(4,771,688) (4,090,776)
Accumulated Deficit End of Period
$(4,826,104) $(4,070,758)
Net Income (Loss) Applicable to Common Shares $( 84,130)
$( 5,982)
Earnings Per Share Data:
Net Income (Loss)
$( 0.02) $( 0.00)
Weighted Average Number of Common
Shares Outstanding
5,112,496 4,812,496
The accompanying notes are an integral part of these financial statements.
Advanced Medical Products Inc.
Statement of Cash Flows
Three Months
Ended
Sept. 30, 1997
Sept. 30, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Net Income
$ ( 54,417) $ 20,018
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Depreciation and amortization
37,088 28,925
Provision for doubtful accounts
( 15,134) ( 24,347)
Change in assets and liabilities:
Accounts receivable
161,272 133,956
Inventory
( 38,681) ( 122,446)
Other assets
33,578 ( 16,851)
Accounts payable
16,793 ( 24,270)
Other current liabilities
( 47,823) ( 63,397)
Total adjustments
147,093 ( 88,430)
Net cash provided (used) by operating activities
92,676 ( 68,412)
Cash flows used by investing activities:
Capital expenditures
- -0- ( 11,769)
Capitalization of software costs
( 1,750) ( 7,840)
Net cash used by investing activities
( 1,750) ( 19,609)
Cash flows provided (used) by financing activities:
Net payments on short term notes
( 94,047) 150,000
Payments on long-term debt
( 15,836) ( 10,447)
Net cash provided (used) by financing activities
( 109,883) 139,553
Net increase (decrease) in cash
( 18,966) 51,532
Cash, beginning of period
50,938 14,631
Cash, end of period
$ 31,972 $ 66,163
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest
$ 22,862 $ 3,727
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
three-month period ended September 30, 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
Sept. 30, 1997 June 30, 1997
Inventory consisted of:
(unaudited)
Raw materials and work in process $
336,722 $ 305,188
Finished goods
214,771 207,624
$ 551,493 $ 512,812
3. Other Current Assets
Prepaid expenses
$ 8,414 $ 41,041
Deposits current
5,262 4,962
Deferred taxes
9,914 9,914
Advances 0
1,250
$ 23,590 $ 57,168
4. Other Current Liabilities
Accrued royalties
$ 38,355 $ 39,593
Accrued vacation pay
18,341 25,362
Deferred service contract revenue
123,268 125,200
Warranty reserve
22,274 26,489
Accrued sale tax liability
8,057 25,084
$ 212,795 $ 254,961
5. 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 September 30, 1997, $ 13,982 in
interest was due, in addition to the principle.
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 September 30,
1997 was $54,346.
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 September
30, 1997.
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, as of March 31, 1996, $102,000
of their accrued dividend and interest into 300,000 shares of common
stock at $0.34 per share; these 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.
8. 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 September 30, 1997, $ 343,878 was borrowed by the Company
under this agreement.
9. 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 $529,338 for the three months ended September 30, 1997
represent a 33% decrease from sales of $793,889 in the comparable
quarter in 1996. This decrease is due to lower sales to existing
OEM/International customers, as well as domestic customers.
The Companys gross profit margin was 49% of net sales for the three
months ended September 30, 1997. The decrease from a 62% gross
margin reported for the first quarter of 1996 was primarily a result
of unabsorbed operations costs at the lower level of sales.
Selling, general and administrative expenses of $259,751 for the
three months ended September 30, 1997 were 49% of net sales for the
period compared to expenses of $413,477 or 52% of net sales for the
same period last year. Actual expenses were 37% less than they were
in the first quarter of fiscal 1996. This is due to lower
commissions and efforts to cut and control costs company wide.
Research and development costs during the first quarter of fiscal
1997 decreased 53% from last year. This is a result of efforts to
decrease expenses company-wide.
Net income for the quarter ended September 30, 1997 was a loss of
$54,417 compared to a profit of $20,018 for the same period last
year. The loss for the first quarter of fiscal 1997 is primarily a
result of lower gross profit at the lower level of sales.
During the first three months of fiscal 1997, accounts receivable
decreased from $554,552 at June 30, 1997 to $408,414 at September
30, 1997. Inventory increased from $512,812 to $551,493 primarily
due to timing of receipt of deliveries from manufacturing sources.
Liquidity and Capital Reserves
Operating activities provided $ 147,093 of cash during the quarter
ended September 30, 1997 compared with $68,112 used during the
quarter ended September 30, 1996. In the first quarter of fiscal
1997, $1,759 was capitalized, compared to $19,609 for capital
expenditures for the same period 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).
The Company does not believe that internally generated funds and
existing borrowing resources will provide sufficient working capital
to meet present commitments and future needs. In order to improve
its cash flow position, the Company has undertaken steps internally
to improve gross margins and fixed costs, and is seeking additional
capital sources.
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: ___________________________
Ronald G. Moyer, CEO
Dated:
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