SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT of 1934
FOR QUARTER ENDED February 29, 1996 COMMISSION FILE
NUMBER 0-16664
______________________________
GENETIC LABORATORIES WOUND CARE, INC.
State of Incorporation: Minnesota
I.R.S. Employer Identification No: 41-1604048
Executive Offices: 2726 Patton Road, St. Paul, MN 55113
Telephone Number: (612) 633-0805
______________________________
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_____
______________________________
On February 29, 1996, there were 2,389,100 shares of the
Registrant's $.01 par value common stock outstanding.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
GENETIC LABORATORIES WOUND CARE, INC.
BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
February 29, May 31
1996 1995
__________ __________
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $328,209 $295,830
Receivables
Trade, less allowance 313,364 277,541
Other 0 10,787
Inventories 453,668 429,105
Prepaid expenses 75,066 29,141
__________ __________
Total current assets 1,170,307 1,042,404
__________ __________
PROPERTY AND EQUIPMENT
Production equipment
and tooling 59,093 59,093
Office equipment 140,462 132,492
__________ __________
199,555 191,585
Less accumulated depreciation
and amortization 170,933 159,990
__________ __________
28,622 31,595
__________ __________
OTHER ASSETS, net 9,089 11,952
__________ __________
$1,208,018 $1,085,951
========== ==========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 93,405 $132,368
Accrued expenses 54,206 65,804
Income taxes payable 25,246 9,800
__________ __________
Total current liabilities 172,857 207,972
__________ __________
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 23,891 23,261
Additional paid-in capital 641,781 625,186
Retained earnings 369,489 229,532
__________ __________
1,035,161 877,979
__________ __________
$1,208,018 $1,085,951
========== ==========
</TABLE>
<TABLE>
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net revenues $600,260 $558,226 $1,813,678 $1,664,926
Cost of revenues 246,911 214,965 750,836 636,050
__________ __________ __________ _________
Gross profit 353,349 343,261 1,062,842 1,028,876
Operating expenses 338,294 287,152 1,025,471 856,154
__________ __________ __________ _________
Income from operations 15,055 56,109 37,371 172,722
Other income 2,874 959 172,586 2,680
__________ __________ __________ _________
Income before taxes 17,929 57,068 209,957 175,402
Provision for taxes 8,000 22,500 70,000 57,000
__________ __________ __________ _________
Net income $9,929 $ 34,568 $139,957 $118,402
============ ========== ========== =========
Per common share data
Net income $.00 $.01 $.05 $.05
===== ====== ======== ======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 2,550,050 2,344,020 2,550,050 2,344,020
========== ========== ========== ==========
</TABLE>
<TABLE>
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 29,
1996 1995 1996 1995
_______ _______ ____ ____
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $9,929 $ 34,568 $139,957 $118,402
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and amortization 4,802 5,486 13,806 16,495
Changes in current assets
and liabilities
Receivables (42,600) (17,259) (25,036) (20,254)
Inventories (8,328) (162,656) (24,563) (233,216)
Prepaid expenses 13,512 7,004 (45,925) (10,846)
Accounts payable (72,403) 91,397 (38,963) 73,823
Accrued expenses 8,938 (600) (11,598) (9,236)
Income taxes payable (17,000) 11,500 15,446 19,000
___________ ________ ________ _______
Net cash provided by (used in)
operating activities (103,150) (30,560) 23,124 (45,832)
__________ _______ _______ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(6,050) (763) (7,970) (9,467)
__________ __________ ________ ________
Net cash used in investing activities
(6,050) (763) (7,970) (9,467)
________ _________ _______ ______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of issuance of
common stock 0 0 17,225 0
__________ _________ _______ _______
Net cash used in
financing activities 0 0 17,225 0
__________ ________ ______ ______
Net increase (decrease) in cash
and cash equivalents (109,200) (31,323) 32,379 (55,299)
CASH and CASH EQUIVALENTS
Beginning 437,409 235,195 295,830 259,171
_________ ________ ________ ________
Ending $328,209 $203,872 $328,209 $203,872
=========== ======== ========= ========
GENETIC LABORATORIES WOUND CARE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Basis of Presentation
The interim financial statements are unaudited but in the opinion
of management, reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the
Company's financial position as of February 29, 1996, and the
results of its operations and its cash flow for the three months
ended February 29, 1996 and February 28, 1995. The results of operations
for any interim period are not necessarily indicative of the results to
be expected for the full year. These statements are condensed and
therefore do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. These financial statements should be read
in conjunction with the financial statements and notes thereto
contained in the Company's Form 10-KSB or Annual Report for the
year ended May 31, 1995.
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Revenues:
Net revenues were $600,260 for the three months ended February 29,
1996 compared to $558,226 for the three months ended February 28,
1995, an increase of 7.5%. Domestic sales increased 3% comparing
the three months ended February 29, 1996 to the three months ended
February 28, 1995. Suture Strip wound closure strips sales were 66%
of net revenues for the three months ended February 29, 1996, compared
to 63% of net revenues for the three months ended February 28, 1995.
Sales to international customers accounted for 24% of net revenues for
the three months ended February 29, 1996, compared to 18% for the three
months ended February 28, 1995. International sales for the nine months ended
February 29, 1996, accounted for 20% of net revenues compared to 16% for the
nine months ended February 28, 1995.
All sales require payment in U.S. funds.
Included in net revenues are royalties of $15,046 for the three
months ended February 28, 1995, and there are no royalties for the
three months ended February 29, 1996. Royalties for the nine months ended
February 28, 1995, were $40,374 and there are no royalties for the nine months
ended February 29,1996. Royalty income has ceased.
Cost of Revenues:
Cost of revenues were $246,911, 41.1% of net revenues, for the
three months ended February 29, 1996, compared to $214,965, 38.5% of
net revenue for the three months ended February 28, 1995. The
increase in cost of revenues was the result of increases in costs of
product components and the increase in sales to international customers
who receive lower pricing than domestic customers.
Operating Expenses:
Operating expenses were $338,294, 56% of net revenues, for the
three months ended February 29, 1996, compared to $287,152, 52% of
net revenues, for the three months ended February 28,1 995.
Approximately $24,000 of the increase was due to planned
increases in product promotional activities intended to accelerate
sales of the company's line of fastener products. The remaining increase
was due largely to increases in research and development expense and salaries.
Other Income:
On June 26, 1995 the Company sold its rights, title and interest
in a royalty agreement with Bio-Vascular, Inc. for $164,213. The
royalty agreement was due to terminate in July 1995. Royalty
revenues of $56,237 and $50,351 were earned under the royalty
agreement for the years ended May 31, 1995 and 1994,
respectively. International sales for the nine months ended
February 29, 1996, accounted for 20% of net revenue, compared to
16% for the nine months ended February 28, 1995.
Liquidity and Capital Resources:
At February 29, 1996, the Company had working capital of $997,450
and a working capital ratio of 6.8 to 1 compared to working
capital of $834,432 and a working capital ratio of 5.0 to 1 on
May 31, 1995. Cash and cash equivalents decreased by $109,200 from
November 30, 1995 to February 29, 1996, as the company reduced payable
by $72,403 and had a receivables increase by $42,600.
The Company has a revolving line of credit with a local bank in
the amount of $75,000. Outstanding balances on the line of credit
at February 29, 1996 and May 31, 1995 were $0.
The Company expects that is will be able to fund its working
capital requirements for the year through internally generated
funds.
Major Supplier:
As reported in the Company's November 30, 1994 10QSB a major
supplier will discontinue production of an essential component
material used in the Company's wound closure strips and fastener
products. The Company immediately began identifying alternatives
for the discontinued component material. The Company has
qualified an alternative component material for its wound closure
strips and fastener products and does not expect to have any negative
effects from the change to the alternative component material.
Inventory levels and sales are not expected to be affected by this change.
Major Customers:
For the three months ended February 29, 1996, one customer accounted
for approximately 14% of net revenue. This same customer accounted for
18.5% of net revenues for the year ended May 31, 1995.
FINANCIAL STATEMENTS
The interim financial statements are unaudited but in the opinion
of the management, reflect all adjustment necessary for a fair
presentation of results for such periods. The results of
operations for any interim period are not necessarily indicative
of results for the full year.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
27 Financial Data Schedule
B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GENETIC LABORATORIES WOUND CARE, INC.
April 11, 1996
By: /s/ Arthur A. Beisang
_____________________________
Arthur A. Beisang
Chief Executive Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the November
30, 1995 10QSB and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 328,209
<SECURITIES> 0
<RECEIVABLES> 313,364
<ALLOWANCES> 0
<INVENTORY> 453,668
<CURRENT-ASSETS> 1,170,307
<PP&E> 199,555
<DEPRECIATION> 170,933
<TOTAL-ASSETS> 1,208,018
<CURRENT-LIABILITIES> 172,857
<BONDS> 0
<COMMON> 23,891
0
0
<OTHER-SE> 1,011,270
<TOTAL-LIABILITY-AND-EQUITY> 1,208,018
<SALES> 600,260
<TOTAL-REVENUES> 600,260
<CGS> 246,911
<TOTAL-COSTS> 338,294
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,929
<INCOME-TAX> 8,000
<INCOME-CONTINUING> 9,929
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,929
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
