SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to __________________
0-16594
Commission file number ________________________________________________
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)
727-576-6311
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
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 ______
10Q-1
<PAGE>
i
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
Index
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1999 and March 31, 1999......................... 1
Consolidated Statements of Operations -
Three Months Ended June 30, 1999 and 1998................ 2
Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
Three Months Ended June 30, 1999......................... 3
Consolidated Statements of Cash Flow -
Three Months Ended June 30, 1999 and 1998............... 4
Notes to Consolidated Financial Statements................. 5 - 9
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
<PAGE>
1
Item 1. Financial Statements
PART 1 - FINANCIAL INFORMATION
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 0 $ 205
Accounts Receivable, Net 2,207 2,473
Inventories 2,126 1,990
Prepaids and Other 219 69
------------- -------------
Total Current Assets 4,552 4,737
Property and Equipment, Net 1,881 2,013
Other Assets, Net 1,284 1,761
------------- -------------
Total Assets $ 7,717 $ 8,511
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current Maturities of Long-Term Debt $ 833 $ 874
Accounts Payable and Accrued Liabilities 2,417 2,405
------------- -------------
Total Current Liabilities 3,250 3,279
Net Liabilities of Discontinued Operations 12 1,917
Long-Term Debt, Less Current Maturities 14,706 14,915
------------- -------------
Total Liabilities 17,968 20,111
------------- -------------
Stockholders' Equity (Deficit):
Voting Preferred Stock 1 1
Common Stock 64 64
Capital In Excess of Par Value 8,583 8,583
Accumulated Deficit (18,571) (19,920)
Less: Treasury Stock (328) (328)
------------- -------------
Total Stockholders' Equity (Deficit) (10,251) (11,600)
------------- -------------
Total Liabilities and Stockholders' Equity (Deficit) $ 7,717 $ 8,511
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
2
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Revenue:
Net Sales and Services $ 3,836 $ 3,500
Costs and Expenses:
Cost of Sales and Services 2,076 1,984
Selling, General and Administrative 1,160 912
Depreciation and Amortization 255 239
Interest, Net 294 285
---------------- ---------------
Total Costs and Expenses 3,785 3,420
---------------- ---------------
Income from Continuing Operations Before
Discontinued Operations and Extraordinary Gain 51 80
Loss from Operations of Discontinued Operations,
Net of Income Tax (524) (516)
Gain on Forgiveness of Debt of Discontinued Operations 0 662
Gain on Disposal of Discontinued Operations,
Net of Income Tax 1,822 0
---------------- ---------------
Net Income $ 1,349 $ 226
================ ===============
Earnings per Basic and Diluted Common Share:
Income from Continuing Operations $ 0.01 $ 0.01
Income from Discontinued Operations 0.20 0.03
---------------- ---------------
Net Income per Basic and Diluted Common Share $ 0.21 $ 0.04
================ ===============
Weighted average Common Shares Outstanding - Basic and Diluted 6,406 6,128
================ ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
3
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED JUNE 30, 1999
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------------------------------------------------
Number Par Capital in Retained Treasury
of Value Excess of Earnings Stock Total
Shares Par Value (Deficit)
----------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1999 6,406,191 $ 64 $ 8,583 $ (19,920) $ (328) $ (11,601)
Net Income for Three Months
Ended June 30, 1999 1,349 1,349
---------------------------------------------------------------------------------------------
Balance, June 30, 1999 6,406,191 $ 64 $ 8,583 $ (18,571) $ (328) $ (10,252)
=========== =========== =========== ============= ============ ============
VOTING PREFERRED STOCK
---------------------------------------------------------------------------------------------
Number Par
of Value
Shares
----------- -----------
Balance, March 31, 1999 6,500,000 $ 1 $ 1
----------- ----------- ------------
Balance June 30, 1999 6,500,000 $ 1 $ 1
----------- ----------- ------------
Total Stockholders' Equity
------------
(Deficit), June 31, 1999 $ (10,251)
============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
4
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Operating Activities
Net Income (Loss) from Continuing Operations $ 51 $ 80
------------- --------------
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 255 239
Loss on Early Retirement of Fixed Assets 0 21
(Increase) Decrease in:
Accounts Receivable 266 (58)
Inventories (136) (69)
Prepaids and Other (106) (22)
Increase (Decrease) in:
Accounts Payable and Other Accrued Liabilities 12 93
------------- --------------
Total Adjustments 291 204
------------- --------------
Net Cash Provided (Used) by Continuing Operations 342 284
------------- --------------
Investing Activities
Expended for Property and Equipment (55) (18)
Expended for Product Development (44) 0
Expended for Patents and Other Assets (2) (76)
------------- --------------
Net Cash Used by Investing Activities of Continuing Operations (101) (94)
------------- --------------
Financing Activities
Payments on Notes Payable and Long-Term Debt (272) (13)
Advances to Affiliates - Discontinued Operations (174) (626)
Proceeds from Borrowing on Notes Payable and Long-Term Debt 0 0
------------- --------------
Net Cash Used by Financing Activities of Continuing Operations (446) (639)
------------- --------------
Net Decrease in Cash - Continuing Operations (205) (449)
Cash at Beginning of Period - Continuing Operations 205 465
------------- --------------
Cash at End of Period - Continuing Operations $ 0 $ 16
============= ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
5
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, 1999
are not necessarily indicative of the results that may be expected for the year
ended March 31, 2000. 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, 1999.
The consolidated financial statements include the accounts of the Company
and its subsidiaries, MTS Packaging Systems, Inc. ("MTS Packaging"), MTL and
LifeServ. MTL and LifeServ represent discontinued operations, and accordingly,
these discontinued segments' net liabilities are shown as one amount under the
captions "Net Liabilities of Discontinued Operations" for fiscal 2000 and fiscal
1999. The results of operations of these discontinued segments for fiscal 2000
and fiscal 1999 have been excluded from the components of "Income (Loss) from
Continuing Operations" and shown under the caption "Loss from Operations of
Discontinued Operations" in the Statements of Operations.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
----------------- -----------------
(In Thousands)
<S> <C> <C>
Raw Materials $ 925 $ 767
Finished Goods and Work in Progress 1,341 1,363
Less: Inventory Valuation Allowance (140) (140)
================ ================
$ 2,126 $ 1,990
================ ================
Inventories are stated at the lower of cost (first-in, first-out) or
market.
</TABLE>
NOTE C - EARNINGS PER SHARE
Net income per common share is computed by dividing net income 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. The effect of all options and warrants were not included in the
calculation of net income per diluted common share as the effect would have been
anti-dilutive.
NOTE D - DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 1999, the Company implemented a
strategy of focusing its resources in its core business, MTS Packaging, and
divesting of the other two business segments it historically operated.
<PAGE>
6
In May 1999, the Company sold LifeServ Technologies, Inc. ("LifeServ"), its
Health Care Information Systems business segment. The Asset Acquisition
Agreement provided, among other things, for the buyer to receive substantially
all the assets of LifeServ in consideration of the assumption of certain stated
liabilities of approximately $5 million. The sale resulted in a gain of
approximately $1.8 million, which has been recognized in the accompanying
financial statements as a gain on disposal of discontinued operations. During
the first quarter, LifeServ had revenue of $454,000 and costs and expenses of
$978,000 resulting in a loss from discontinued operations of $524,000.
The Company is discussing the possible sale of its Clinical Laboratory
Services subsidiary, MTL, with several potential buyers. In the event that a
sale does not close, management has committed itself to a plan to dispose of MTL
either through a sale to another potential buyer or abandon the business. MTL's
net revenue for the first quarter of fiscal 2000 and fiscal 1999 was $2,445,000
and $1,819,000 respectively. The net loss from the discontinued operations of
MTL was $486,000 and $45,000 in the first quarter of fiscal 2000 and fiscal 1999
respectively.
The Company estimated the loss on disposal of MTL to be $2.5 million and
recorded a charge of that amount in the fourth quarter of fiscal 1999. The loss
on disposal of MTL included a reserve of $500,000 for the estimated cost of
disposal and operating losses through the disposal date. The Company believes
the estimated loss on disposal of MTL is reasonable based upon current
circumstances.
The carrying value of the net assets of discontinued operations at June 30,
1999 and March 31, 1999 is comprised of the following.
<TABLE>
<CAPTION>
Total
LifeServ MTL Discontinued
Operations
------------------------ ------------------------ -------------------------
June 30, March 31, June 30, March 31, June 30, March 31,
1999 1999 1999 1999 1999 1999
---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current Assets $ 25 $ 1,047 $ 3,463 $ 3,945 $ 3,488 $ 4,992
Other Assets 0 2,088 0 71 0 2,159
--------- --------- --------- ---------- ---------- ----------
Total Assets $ 25 $ 3,135 $ 3,463 $ 4,016 $ 3,488 $ 7,151
--------- --------- --------- ---------- ---------- ----------
Current Liabilities $ 25 $ 4,532 $ 2,166 $ 2,876 $ 2,191 $ 7,408
Long-Term Liabilities 0 346 1,309 1,314 1,309 1,660
--------- --------- --------- ---------- ---------- ----------
Total Liabilities $ 25 $ 4,878 $ 3,475 $ 4,190 $ 3,500 $ 9,068
--------- --------- --------- ---------- ---------- ----------
Net Assets (Liabilities)
of Discontinued Operations $ 0 $ (1,743) $ (12) $ (174) $ (12) $ (1,917)
========= ========= ========= ========== ========== ==========
</TABLE>
<PAGE>
7
NOTE E - LONG-TERM DEBT
Long-term debt related to continuing operations consists of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
------------- --------------
(In Thousands)
<S> <C> <C>
Bank Term Loan; payable in installments of interest at 7.5% 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. $ 14,594 $ 14,806
Unsecured Notes Payable plus interest at 12% through February 1999, and 18%
until repaid. 150 150
Unsecured Notes Payable due September 1999 plus interest at 12%. 185 200
Unsecured Note Payable plus interest at 3%, payable in monthly installments
of $2,394 through September 2006. 187 193
Unsecured Note Payable under settlement agreement with State of Florida
Department of Revenue, payable in monthly installments of $2,500-$3,500
over a period of four to eight years. 282 284
Other Notes and Agreements; interest and principal payable monthly and
annually at various amounts through March 2000. 141 156
------------ -------------
Total Long -Term Debt 15,539 15,789
Less Current Portion (833) (874)
============ =============
LONG-TERM DEBT DUE AFTER 1 YEAR $ 14,706 $ 14,915
============ =============
</TABLE>
The bank notes payable are collateralized by the Company's accounts
receivables, inventory, equipment and intangibles.
On July 15, 1999, the Company received a waiver of certain defaults that
occurred under its bank term loan agreement through June 30, 1999. In addition,
the bank and the Company agreed to modify the loan agreement for results of
operation subsequent to July 1, 1999. The definitive documentation evidencing
the modifications is in the process of being completed.
The Company was served with a summons and complaint relating to a replevin
action commenced by a creditor (see Contingencies). The Company notified its
bank of the action within ten (10) days of being served. On July 29, 1999, the
Company received a notice from its bank asserting that a major event of default
occurred when the Company failed to immediately notify the bank of the
commencement of the litigation. The Company believes that the notification was
timely.
<PAGE>
8
NOTE F - CONTINGENCIES
On November 19, 1998, MTL received a refund request in the amount of $1.8
million from Medicare Program Safeguards ("MPS") and $104,000 from the State of
Florida Agency for Health Care Administration ("AHCA"). The request follows an
onsite review in May 1997, by federal and state agencies, of MTL's Medicare and
Medicaid billing practices in 1996. MTL has conducted an internal review of the
billing procedures, records and services in question and disputes MPS's findings
and determination. On December 17, 1998, MTL responded to the MPS determination
and subsequently received a response from MPS in which MPS informed MTL that
recoupment of the refund amount would be stayed while MPS reviewed MTL's
response. Although MTL believes that MPS's determination and the request for
refund are without merit, there can be no assurance that this matter will be
resolved over the near term or that the ultimate outcome of the matter will not
have a material adverse effect on the Company's financial condition and results
of operation.
In July 1999, MTL was served with a summons and complaint relating to a
replevin action commenced by a secured creditor of Community Clinical
Laboratories, Inc. ("CCL"). MTL purchased certain assets of CCL in September
1998. The replevin action seeks to allow the secured creditor to obtain
possession of certain equipment used by MTL in the operation of its business. If
the secured creditor is successful in obtaining possession of the equipment, the
operations of MTL would be adversely effected. The Company has retained legal
counsel and is in the process of responding to the action.
The Company is involved in certain claims and other legal actions arising
in the ordinary course of business. There can be no assurances that these
matters will be resolved on terms acceptable to the Company. In the opinion of
management, based upon advice of counsel and consideration of all facts
available at this time, the ultimate disposition of these matters will not have
a material adverse effect on the financial position, results of operations or
liquidity of the Company.
<PAGE>
9
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 in 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
Three Months Ended June 30, 1999 and 1998
- -----------------------------------------
Net sales and services for the three months ended June 30, 1999 increased
10% to $3.8 million from $3.5 million during the same period the prior year.
Net sales increased primarily as a result of a greater number of punch
cards and packaging machines sold to pharmacies. MTS Packaging Systems, Inc.'s
("MTS Packaging") customer base continues to consolidate as a result of
acquisitions that has increased the number of pharmacies serviced by MTS
Packaging. This consolidation has had a favorable impact on the volume of
product MTS Packaging sells to its existing customers, however, it has caused a
slight decrease in selling prices of disposables.
Cost of sales and services for the three months ended June 30, 1999
increased 5% to $2.1 million from $2.0 million during the same period the prior
year. Cost of sales and services as a percentage of sales decreased to 54.1%
from 56.7% during the same period the prior year. The decrease is primarily due
to certain fixed components of cost of sales and services not increasing as
revenue increased.
<PAGE>
10
Selling, general and administration expenses for the three months ended
June 30, 1999 increased 27% to $1.2 million from $0.9 million during the same
period the prior year. The increase resulted primarily from an increase in
personnel costs that resulted from the addition of personnel to accommodate
increased sales and services.
Depreciation and amortization expenses for the three months ended June 30,
1999 increased 6.7% to $255,000 from $239,000 during the same period the prior
year. This increase is a result of new assets being placed into service.
Interest expense for the three months ended June 30, 1999 increased 3.2% to
$294,000 from $285,000 during the same period the prior year. The increase
results from additional debt, which the Company incurred during the fourth
quarter of the previous fiscal year.
Year 2000 Compliance
- --------------------
Introduction
The Company's year 2000 ("Y2K") compliance project is intended to determine
the readiness of the Company's business for the year 2000. The Company has
identified three areas where the Y2K problem creates risk to the Company. These
areas are a) internal information systems; b) system capabilities of third party
business with relationships with the Company, including product suppliers,
customers, service providers and companies that interface their software and
hardware products with products sold by the Company; and c) product liability
claims arising out of the non-performance of computer products sold by the
Company.
Plan to Address Y2K Compliance
In December 1998, the Company formed a Y2K compliance project team to
develop an overall plan to address Y2K readiness issues. The plan is being
developed in phases.
o Phase I
a) Identify all internal hardware and software systems that must be
compliant.
b) Appoint individuals within the Company to be responsible for
communication with third party businesses regarding Y2K
readiness.
c) Appoint individuals within the Company to be responsible for
evaluation of product liability issues that may exist regarding
products sold by the Company.
o Phase II - Identify Y2K problems that may exist in each risk area.
o Phase III - Repair, modify or replace systems that are determined to
be non-compliant.
o Phase IV - Test systems to confirm that any repairs, modification or
replacements have resulted in compliance.
State of Readiness
Internal Systems
----------------
The Company believes that the internal information systems in its
Medication Packaging and Dispensing Systems subsidiary are in a state of Y2K
readiness.
<PAGE>
11
The internal information systems utilized in the Company's Clinical
Laboratory Services business are not Y2K compliant. Management has committed to
a plan to dispose of this business and anticipates that the disposal of the
business will occur before any Y2K readiness issues need to be addressed.
Material Third Party Readiness
------------------------------
Individuals within the Company have been assigned responsibility for
communicating with material third-party businesses with whom the Company has
business relationships and have begun a survey process. The Company will
determine the readiness of third parties prior to September 30, 1999.
Product Liability
The Company believes the products sold by the Medication Packaging and
Dispensing Systems subsidiary do not have Y2K issues associated with them.
The Services rendered by the Company's Clinical Laboratory Services
business are directly effected by the internal information systems utilized to
perform analytical laboratory tests. If the Company is not successful in
implementing Y2K compliant internal information systems in its Clinical
Laboratory Services business, it could adversely effect that business' ability
to perform diagnostic tests and provide the results of those test to its client
physicians, however, management has committed to a plan to dispose of this
business before the Y2K readiness issues need to be addressed.
The rights to sell the products of the Company's Health Care Information
Systems business were sold in May 1999. Any liabilities arising from Y2K issues
will be assumed by the buyer.
Cost of Project
Expenditures to date on Y2K compliance have not been material to the
Company's operation or financial condition.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of the current fiscal year, the Company had net
income from continuing operations of $51,000 compared to net income from
continuing operations of $80,000 the prior year. Cash provided by operating
activities of continuing operations was $342,000 during the three months ended
June 30, 1999 compared to $284,000 provided in the prior year. The Company had
working capital of $1,302,000 at June 30, 1999.
Cash was provided by operating activities of continuing operations during
the three months ended June 30, 1999 primarily due to profitable operations.
Investing activities used $101,000 during three months ended June 30, 1999
as a result of expenditures for capital equipment and product development.
Financing activities used $446,000 during the three months ended June 30,
1999 primarily as a result of payments made to the Company's principal lenders.
In addition, the operations of MTL required cash to support working capital
needs while potential buyers are identified and a liquidation strategy is
developed.
The Company's short-term and long-term liquidity is primarily dependent on
its ability to generate cash flow from operations. Inventory levels are not
expected to change significantly based upon the Company's current level of
operation. Increases in revenue have generally resulted in corresponding
increases in accounts receivable. Cash flow from operations is anticipated to
support an increase in accounts receivable.
<PAGE>
12
The Company has several new product development projects underway that are
expected to be funded by cash flow from operations. These projects are monitored
on a regular basis to attempt to ensure that the anticipated costs associated
with them do not exceed the Company's ability to fund them from cash flow from
operations.
The Company believes that cash generated from operations will be sufficient
to meet the capital expenditures, product development and working capital needs
of MTS Packaging as well as support the operations of MTL until its disposal.
In addition, after the disposal of two business segments, the Company will
focus on its core business, MTS Packaging, which has historically generated
positive cash flow from operations. As a result, management believes that
certain administrative costs that were required to support three separate
businesses can be reduced.
<PAGE>
13
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None
B. Reports on Form 8-K
None
Signature
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL TECHNOLOGY SYSTEMS, INC.
Date: August 13, 1999 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, 1999 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-31-2000
<PERIOD-START> Apr-1-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1.00
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,432
<ALLOWANCES> (225)
<INVENTORY> 2,126
<CURRENT-ASSETS> 4,552
<PP&E> 7,069
<DEPRECIATION> (5,188)
<TOTAL-ASSETS> 7,717
<CURRENT-LIABILITIES> 3,250
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0
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<COMMON> 64
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<SALES> 3,836
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,349
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
