FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 Commission File Number 0-16594
MEDICAL TECHNOLOGY SYSTEMS, INC.
-----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 59-2740462
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12920 Automobile Boulevard, Clearwater, Florida 33762
-----------------------------------------------------
(address of principal executive offices)
Registrant's telephone number, including area code: (727) 576-6311
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (for 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 ____
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1998
----- ----------------------------
Common Stock, $.01 par value 6,129,673
Preferred Stock, $.0001 par value 6,500,000
<PAGE>
i
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
Index
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30,1998 and March 31, 1998......................... 1
Consolidated Statements of Operations -
Three months ended June 30, 1998 and 1997............... 2
Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
Three months ended June 30, 1998........................ 3
Consolidated Statements of Cash Flow -
Three months ended June 30, 1998 and 1997............... 4
Notes to Consolidated Financial Statements.................. 5 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9 - 12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signature................................................... 13
1
<PAGE>
Item 1. Financial Statements
PART I - FINANCIAL INFORMATION
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
----------------- ----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 16 $ 324
Accounts Receivable, Net 6,027 5,277
Inventories 2,473 2,481
Prepaids and Other 178 206
-------------------- -------------------
Total Current Assets 8,694 8,288
Property and Equipment, Net 2,960 3,173
Other Assets, Net 4,285 4,301
-------------------- -------------------
Total Assets $ 15,939 $ 15,762
==================== ===================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt $ 1,127 $ 625
Accounts Payable-Trade and Accrued Liabilities 5,113 4,811
-------------------- -------------------
Total Current Liabilities 6,240 5,436
Liabilities Subject to Compromise 0 826
Long-Term Debt, Less Current Maturities 15,586 15,613
-------------------- -------------------
Total Liabilities 21,826 21,875
-------------------- -------------------
Stockholders' Equity (Deficit):
Voting Preferred Stock 1 1
Common Stock 62 62
Capital in Excess of Par Value 8,588 8,588
Retained Earnings (Deficit) (14,207) (14,433)
Less: Treasury Stock (331) (331)
-------------------- -------------------
Total Stockholders' Equity (Deficit) (5,887) (6,113)
-------------------- -------------------
Total Liabilities and Stockholders' Equity $ 15,939 $ 15,762
==================== ===================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands; Except Earnings Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Month Ended
June 30,
1998 1997
------------ -----------
<S> <C> <C>
Revenue:
Net Sales and Services $ 7,045 $ 5,147
Costs and Expenses:
Cost of Sales 4,092 2,886
Selling, General and Administrative 2,718 2,000
Depreciation and Amortization 362 358
Interest, Net 309 273
-------------- --------------
Total Costs and Expenses 7,481 5,517
-------------- --------------
Income (Loss) Before Extraordinary Gain (436) (370)
Extraordinary Gain on Forgiveness of Debt 662 0
-------------- --------------
Net Income (Loss) $ 226 $ (370)
============== ==============
Earnings (Loss) Per Basic and Diluted Common Share
Income (Loss) Before Extraordinary Gain $ (0.07) $ (0.06)
Extraordinary Gain On Debt Forgiveness 0.11 0.00
-------------- --------------
$ 0.04 $ (0.06)
============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED JUNE 30, 1998
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------------------------------------
Number $0.01 Capital in Retained
of Par Excess of Earnings Treasury
Shares Value Par Value (Deficit) Stock Total
----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 6,129,673 $ 62 $ 8,588 $ (14,433) $ (331) $ (6,114)
Net Income for Three Months
Ended June 30, 1998 226 226
-----------------------------------------------------------------------------------------------
Balance, June 30, 1998 6,129,673 $ 62 $ 8,588 $ (14,207) $ (331) $ (5,888)
=========== ============== ============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VOTING PREFERRED STOCK
-----------------------------------------------------------------------------------------------
Number $0001
of Par
Shares Value
----------- ------------
<S> <C> <C> <C>
Balance, March 31, 1998 6,500,000 $ 1 $ 1
----------- -------------- --------------
Balance, June 30, 1998 6,500,000 $ 1 $ 1
----------- -------------- --------------
Total Stockholders' (Deficit), --------------
June 30, 1998 $ (5,887)
==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
------------ ------------
<S> <C> <C>
Operating Activities:
Net Income (Loss) $ 226 $ (370)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 362 358
Extraordinary Gain on Debt Forgiveness (662) 0
(Increase) Decrease in:
Accounts Receivable (722) (150)
Inventories 8 (23)
Prepaid Expenses and Other Assets 28 239
Loss On Early Retirement of Fixed Assets 22 0
Increase (Decrease) in:
Accounts Payable and Other Accrued Liabilities 193 317
--------------- ---------------
Total Adjustments (771) 741
--------------- ---------------
Net Cash Provided by Operating Activities (545) 371
--------------- ---------------
Investing Activities
Expended for Property and Equipment (96) (252)
Acquisition, Net of Cash Acquired 0 (195)
Expended for Product Development (142) (30)
Expended for Other Assets 0 (44)
--------------- ---------------
Net Cash Provided by Investing Activities (238) (521)
--------------- ---------------
Financing Activities
Payments on Notes Payable, Long-Term Debt (25) (18)
Proceeds from Borrowing on Notes Payable and Long-Term Debt 500 51
--------------- ---------------
Net cash Used by Financing Activities 475 33
--------------- ---------------
Net Increase (Decrease) in Cash (308) (117)
Cash at Beginning of Period 324 616
--------------- ---------------
Cash at End of Period $ 16 $ 499
=============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest $ 298 $ 289
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes 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 three month period ended June 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1999. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended March 31, 1998.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
----------------- -----------------
(In Thousands)
<S> <C> <C>
Raw Materials $ 557 $ 531
Finished Goods and Work in Progress 2,185 2,219
Less: Inventory Valuation Allowance (269) (269)
================== ================
$ 2,473 $ 2,481
================== ================
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market.
NOTE C - EARNINGS PER SHARE
Net income (loss) per common share is computed by dividing net income
(loss) by the basic and diluted weighted average number of shares of common
stock outstanding. For diluted weighted average shares outstanding, the Company
used the Treasury stock method to calculate the common stock equivalents that
stock options would represent.
NOTE D - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------------- --------------
(In Thousands)
<S> <C> <C>
PlanNote I; interest only at 7.5% payable monthly until September 1, 1998;
installments of interest and principal monthly for ten years ending
September 1, 2006, with a lump sum payment of approximately $11.4 million on
that date secured by all tangible and intangible
assets of the Company. $ 15,000 $ 15,000
</TABLE>
6
<PAGE>
NOTE D - LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------------- --------------
(In Thousands)
<S> <C> <C>
Note Payable; interest at 12% payable $20,026 per month including
interest maturing September 1, 2002. Secured by equipment at a
customer site and the payments from a lease contract receivable. 643 688
Demand note due October 31, 1998 plus interest at 10%. 500 0
Seller Financing Under Tampa Pathology Acquisition Agreement, face value of
$487,628 discounted at 10%, with variable monthly payments
until satisfied. 273 234
Other Notes and Agreements; interest and principal payable monthly and
annual at various amounts through March 2000. 297 316
-------------- -------------
Total Long -Term Debt 16,713 16,238
Less Current Portion (1,127) (625)
============== =============
LONG-TERM DEBT DUE AFTER 1 YEAR $ 15,586 $ 15,613
============== =============
</TABLE>
NOTE E - SEGMENT INFORMATION
The Company is a holding company operating through a number of separate
subsidiaries. The operations of these subsidiaries are comprised of three
business segments; (1) the Medication Packaging and Dispensing Systems segment
which manufactures and distributes equipment, systems and supplies to pharmacies
who service nursing homes and hospitals; (2) the Health Care Information Systems
segment which provides software systems for medication management and
point-of-care electronic documentation for hospitals and other health care
facilities; and (3) the Clinical Laboratory Services segment which provides
diagnostic laboratory services to physicians.
The following is operating information for these business segments for the
three months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
-------------- --------------
<S> <C> <C>
Revenue:
Reportable Segments
Medication Packaging & Dispensing Systems $ 3,500 $ 2,917
Health Care Information Systems 1,726 401
Clinical Laboratory Services 1,819 1,829
-------------- --------------
Total Consolidated Revenue $ 7,045 $ 5,147
============== ==============
</TABLE>
7
NOTE E - SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
-------------- ---------------
<S> <C> <C>
Depreciation and Amortization:
Reportable Segments
Medication Packaging & Dispensing Systems $ 160 $ 136
Health Care Information Systems 72 43
Clinical Laboratory Services 52 61
Corporate 78 118
============= =============
Total Consolidated Depreciation and Amortization $ 362 $ 358
============= =============
Interest Expense:
Reportable Segments
Medication Packaging & Dispensing Systems $ 0 $ 0
Health Care Information Systems 23 4
Clinical Laboratory Services 1 2
------------- -------------
24 6
Unallocated Debts 285 267
============= =============
Total Consolidated Interest Expense $ 309 $ 273
============= =============
Operating Profit (Loss):
Reportable Segments
Medication Packaging & Dispensing Systems $ 863 $ 622
Health Care Information Systems (471) (472)
Clinical Laboratory Services (45) 280
Corporate and Interest (783) (800)
============= ==============
Total Consolidated Operating Profit (Loss) $ (436) $ (370)
============= =============
Identifiable Assets :
Reportable Segments
Medication Packaging & Dispensing Systems $ 5,986 $ 5,853
Health Care Information Systems 4,304 2,667
Clinical Laboratory Services 3,721 2,779
Corporate 1,928 2,461
============== ==============
Total Consolidated Identifiable Assets $ 15,939 $ 13,760
============== ==============
Identifiable Liabilities:
Reportable Segments
Medication Packaging & Dispensing Systems $ 957 $ 318
Health Care Information Systems 2,747 1,650
Clinical Laboratory Services 1,356 801
Corporate 16,766 16,777
-------------- --------------
Total Consolidated Identifiable Liabilities $ 21,826 $ 19,546
============== ==============
</TABLE>
8
<PAGE>
NOTE E - SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
-------------- --------------
<S> <C> <C>
Capital Expenditures:
Reportable Segments
Medication Packaging & Dispensing Systems $ 60 $ 104
Health Care Information Systems 14 82
Clinical Laboratory Services 8 51
Corporate 14 15
-------------- --------------
Total Consolidated Capital Expenditures $ 96 $ 252
============== ==============
</TABLE>
NOTE F - BUSINESS ACQUISITIONS
In April 1998, the Company through its subsidiary LifeServ Technologies,
Inc.(TM) ("LifeServ") entered into an agreement to purchase certain assets of
Peritronics Medical, Inc. ("Peritronics"), a California company which
distributed obstetrical information systems. The agreement provided for the
Company to pay Peritronics shareholders $350,000 in cash, 250,000 shares of the
Company's common stock and assume certain liabilities in the amount of
approximately $330,000. On August 12, 1998, the terms of the agreement were
modified to provide for the Company to pay Peritronics' shareholders $410,000 in
cash and assume certain liabilities in the amount of $330,000. In addition, the
modification allows LifeServ to manage the business of Peritronics until the
closing. The purchase is anticipated to close in September 1998.
On August 4, 1998, the Company through its subsidiary Medical Technology
Laboratories, Inc. ("MTL"), entered into an agreement to purchase certain assets
of Community Clinical Laboratories, Inc. ("CCL"), a Clearwater, Florida company
that provides clinical laboratory testing services to patients referred by
physicians. The agreement provides for MTL to pay CCL a percentage of the
payments received from clients serviced by MTL for a period of five years or
until a maximum of $2,500,000 is paid. The purchase is subject to approval by
the Company's primary lenders and is anticipated to close in August 1998.
NOTE G - BANKRUPTCY MATTERS
On June 12, 1998, a Plan of Reorganization for Medication Management
Technologies, Inc. was confirmed by the bankruptcy court. As a result of the
confirmation of the Plan, the holders of trade and miscellaneous claims will
receive payment of 15% of their claims over a three-year period. The amount of
liabilities that were compromised as part of the Plan was approximately
$662,000. This amount has been classified as an extraordinary gain in the
Company's consolidated Statement of Operations and Statements of Cash Flow for
the three months ended June 30, 1998.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains forward-looking statements within the meaning of
that term in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Additional written or oral forward-looking
statements may be made by the Company from time to time, in filings with the
Securities and Exchange Commission or otherwise. Statements contained herein
that are not historical facts are forward-looking statements made pursuant to
the safe harbor provisions described above. Forward-looking statements may
include, but are not limited to, projections of revenues, income or losses,
capital expenditures, plans for future operations, the elimination of losses
under certain programs, financing needs or plans, compliance with financial
covenants in loan agreements, plans for sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events and the effects of pending and possible litigation,
as well as assumptions relating to the foregoing. In addition, when used in this
discussion, the words "anticipates", "estimates", "expects", "intends", "plans"
and variations thereof and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which can be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained herein. Statements of the Quarterly Report,
particularly in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes to Condensed Consolidated
Financial Statements, describe factors, among others, that could contribute to
or cause such differences. Other factors that could contribute to or cause such
differences include, but are not limited to, unanticipated increases in
operating costs, labor disputes, capital requirements, increases in borrowing
costs, product demand, pricing, market acceptance, intellectual property rights
and litigation, risks in product and technology development and other risk
factors detailed in the Company's Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions of
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.
RESULTS OF OPERATIONS
Revenue
Net sales for the three months ended June 30, 1998 increased 36.9% to $7.0
million from $5.1 million during the comparable period the prior year. Net sales
for each business segment increased as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 % of Increase
---------------- ---------------- ----------------
<S> <C> <C> <C>
Medication Packaging & Dispensing Systems $3.5 Million $2.9 Million 20.7%
Health Care Information Systems $1.7 Million $.4 Million 325.0%
Clinical Laboratory Services $1.8 Million $1.8 Million ---
</TABLE>
Revenue increased in the Medication Packaging and Dispensing System segment
due to a higher number of disposable punch cards sold to MTS Packaging
customers.
10
<PAGE>
Revenue in the Health Care Information System segment increased primarily
due to an increase in the number of installations of medication dispensing,
pharmacy management and obstetrical information systems. In addition, in
anticipation of the closing of the Peritronics Asset Acquisition Agreement,
LifeServ entered into a management agreement with Peritronics which allows
LifeServ to sell Peritronics' products. The sale of Peritronics' products
contributed to the increase in revenues in the health care information business
segment.
Revenue for the Clinical Laboratory business segment was unchanged from the
prior year. Although the level of testing services increased from the prior
year, the revenue per test declined primarily due to adjustments made by the
Company to reflect contractual allowances which third party payers, primarily
Medicare, may make to the amounts owed to the Company.
Cost of Sales and Services
Cost of sales and services for the three months ended June 30, 1998
increased 41.8% to $4.1 million from $2.9 million during the comparable period
the prior year. Cost of sales and services as a percentage of sales increased to
58.1% from 56.1% the prior year. The increase in cost of sales and services
resulted from increases in revenue.
Cost of sales and services as a percentage of revenue for each business
segment in fiscal 1999 compared to 1998 was as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998
---------------- ----------------
<S> <C> <C>
Medication Packaging & Dispensing Systems 56.7% 58.3%
Health Care Information Systems 50.1% 64.2%
Clinical Laboratory Services 68.3% 50.7%
</TABLE>
Cost of sales as a percentage of sales in the Medication Packaging and
Dispensing System segment and the Health Care Information System segment
decreased in fiscal 1999 compared to 1998 primarily due to the fact that certain
fixed costs included in cost of sales did not increase with increases in
revenue.
The increase in cost of services in the Clinical Laboratory Services
segment in fiscal 1999 compared to 1998 resulted from the fact that the Company
processed a greater number of tests in fiscal 1999 compared to 1998. However,
the amount received or anticipated to be received from third party payers,
primarily Medicare, for tests performed in fiscal 1999 decreased compared to
1998.
Selling, General and Administration Expenses (SG&A)
SG&A expenses for the three months ended June 30, 1998 increased 35.9% to
$2.7 million from $2.0 million during the comparable period the prior year. The
increase was due primarily to increases in personnel costs incurred in the
health care information business segment that were required to accommodate the
increase in revenue.
SG&A expenses increased in fiscal 1999 compared to 1998 as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 % Increase
---------------- ---------------- ----------------
<S> <C> <C> <C>
Medication Packaging & Dispensing Systems 493 459 7.4%
Health Care Information Systems 1,237 568 117.8%
Clinical Laboratory Services 569 559 1.8%
Corporate 419 414 1.2%
</TABLE>
11
<PAGE>
Year 2000 Compliance
The Company has reviewed its computer information systems to identify any
systems that could be affected by the "Year 2000" issue. Year 2000 problems
typically arise from computer programs using two characters rather than four to
define the applicable year. This could result in system failure or
miscalculations. The Company is presently upgrading its software systems, which
include its application products and other internally-developed software, and
its information systems hardware used in connection with managing the Company's
operations in order to ensure they are Year 2000 compliant. The Company is
currently assessing the cost of the year 2000 upgrades.
The health care information system products that the Company offers for
sale through LifeServ have been tested for year 2000 compliance, except for the
Performance software system which is currently undergoing an upgrade that is
expected to be completed in fiscal 1999. The Company believes that all of its
products except Performance are year 2000 compliant.
The Company has not assessed fully the impact of the Year 2000 compliance
issue on the entities with whom the Company interacts, such as distributors,
suppliers, manufacturers and customers. The Company also has not verified
whether its non-information systems equipment is Year 2000 compliant.
Interest Expense
Interest expense for the three months ended June 30, 1998 increased 13.2%
to $309,000 from $273,000 during the comparable period the prior year. The
increase resulted primarily from the additional debt which the Company incurred
during the fourth quarter of fiscal 1998 and the first quarter of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1999, the Company had net income of
$226,000 compared to a loss of $370,000 the prior year. Cash used by operating
activities was $545,000 in the first quarter of fiscal 1999 compared to $371,000
provided by operating activities during the first quarter of the prior year. The
Company had $2,454,000 in working capital at June 30, 1998.
Cash was used by operating activities in the first quarter of fiscal 1999
primarily due to increases in accounts receivable that resulted from increased
revenue.
Investing activities used $238,000 in the first quarter of fiscal 1999 as a
result of expenditures for equipment and product development.
Financing activities provided $475,000 in the first quarter of fiscal 1999.
The Company borrowed $500,000 from an individual in the form of a demand loan.
The loan was obtained to support the operations of LifeServ while the Company
attempts to raise equity capital, and is repayable from the proceeds of any
equity capital raised or on October 31, 1998, whichever occurs first.
The Company believes that cash generated from operations will be sufficient
to meet its capital expenditure and working capital needs. The Company has
retained the services of an investment banking firm to assist LifeServ in
raising capital; however, there are no assurances that additional capital will
be available. LifeServ relies solely on cash flow from its operations,
additional debt and equity which they are permitted to obtain in accordance with
the loan agreement with the primary lenders of the Company. There are no
assurances that LifeServ will generate sufficient cash flow from operations to
fund its operations or be successful in raising equity capital. Management
believes that the results of operations of LifeServ will not adversely effect
the overall liquidity of the Company.
12
<PAGE>
The Company, through its subsidiary MTL, acquired certain assets of another
clinical laboratory. This acquisition is expected to increase the amount of
testing services performed by MTL. As a result, the Company has commenced
discussions with its current lenders, as well as other financial institutions
and individuals, to provide MTL with capital in addition to cash generated from
operations, to meet its working capital needs. There are no assurances that
additional capital will be available.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
27 - Financial data schedule as of June 30, 1998 filed herewith (for SEC
use only).
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Pinellas, State of
Florida, on the 14th day of August, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ Michael P. Conroy
---------------------------
Michael P. Conroy
Vice President & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF MEDICAL TECHNOLOGY SYSTEMS, INC. FOR THE THREE
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000823560
<NAME> Medical Technology Systems, Inc.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-START> Apr-1-1998
<PERIOD-END> Jun-30-1998
<EXCHANGE-RATE> 1.00
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 7,884
<ALLOWANCES> (1,857)
<INVENTORY> 2,473
<CURRENT-ASSETS> 8,694
<PP&E> 8,668
<DEPRECIATION> (5,708)
<TOTAL-ASSETS> 15,939
<CURRENT-LIABILITIES> 6,240
<BONDS> 0
0
1
<COMMON> 62
<OTHER-SE> 8,588
<TOTAL-LIABILITY-AND-EQUITY> 15,939
<SALES> 7,045
<TOTAL-REVENUES> 7,045
<CGS> 4,092
<TOTAL-COSTS> 7,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309
<INCOME-PRETAX> (436)
<INCOME-TAX> 0
<INCOME-CONTINUING> (436)
<DISCONTINUED> 0
<EXTRAORDINARY> 662
<CHANGES> 0
<NET-INCOME> 226
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
