-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DWeVrF6XNfK/Y5A8EdMLrQUQnLbJ+BTkAV2kpBQTK+b+kKkF4k29zeSa16mUhPvp N8Xj5sq9yiZnaZLgPqVEYw== 0000807732-98-000011.txt : 19980518 0000807732-98-000011.hdr.sgml : 19980518 ACCESSION NUMBER: 0000807732-98-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MEDICAL PRODUCTS INC CENTRAL INDEX KEY: 0000807732 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 161284228 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16341 FILM NUMBER: 98623449 BUSINESS ADDRESS: STREET 1: 6 WOODCROSS DR CITY: COLUMBIA STATE: SC ZIP: 29212 BUSINESS PHONE: 8034073044 MAIL ADDRESS: STREET 1: 6 WOODCROSS DR CITY: COLUMBIA STATE: SC ZIP: 29212 10QSB 1 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 March 31, 1998. _____ 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 March 31, 1997 June 30, 1997 (unaudited) ASSETS CURRENT ASSETS: Cash $ 49,186 $ 50,938 Accounts Receivable (net of allowance for doubtful Accounts of $29,360 and $30,954 respectively) 579,968 554,552 Inventory (Note 2) 540,818 512,812 Other Current Assets (Note 3) 128,007 57,168 Total Current Assets 1,297,979 1,175,470 Furniture and Equipment, Net 204,245 282,384 Product Software Costs, Net 58,720 90,078 Other Assets Deposits 8,512 8,512 Total Assets 1,569,457 1,556,444 LIABILITIES AND STOCKHOLDERS EQUITY: Current Liabilities: Notes Payable (Note 5) $ 402,615 $ 603,407 Accounts Payable 543,049 510,324 Current Portion Long-Term Debt (Note 6) 24,000 24,000 Accrued Wages and Commissions 107,912 89,949 Other Current Liabilities (Note 3) 233,172 254,961 Total Current Liabilities 1,300,748 1,482,641 Dividends Payable on Preferred Stock 148,015 61,860 Long-Term Liabilities: Long-Term Debt, Net of Current Portion (Note 6) 225,576 102,181 Total Liabilities 1,674,339 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 2,501,175 2,340,915 Accumulated Deficit (4,955,092) (4,771,688) Total Stockholders Equity (104,883) (90,238) Total Liabilities and Stockholders Equity $ 1,569,457 $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 March 31, 1998 March 31, 1997 (unaudited) (unaudited) Net Sales $ 616,092 $ 656,997 Cost of Sales 304,741 336,505 Gross Profit 311,351 320,492 Selling, General and Administrative 262,088 343,366 Research and Development 43,900 41,458 Interest Expenses 22,942 15,675 Income Before Income Taxes ( 17,059) ( 80,007) Provision For Income Taxes - -0- -0- Net Income ( 17,059) ( 80,007) Accumulated Deficit Beginning of Period $ (4,937,826) (4,382,487) Accumulated Deficit End of Period $ (4,955,593) $ (4,462,494) Net Income (Loss) Applicable to Common Shares $ ( 46,767) $ ( 109,720) Earnings Per Share Data: Net Income (Loss) $ ( 0.01) $ ( 0.02) Weighted Average Number of Common Shares Outstanding 5,679,162 5,112,495 The accompanying notes are an integral part of these financial statements. Advanced Medical Products Inc. Statement of Operations and Accumulated Deficit Nine Months Ended March 31, 1998 March 31, 1997 (unaudited) (unaudited) Net Sales $ 1,645,896 $ 2,165,840 Cost of Sales 817,789 1,094,840 Gross Profit 828,107 1,071,000 Selling, General and Administrative 809,664 1,248,727 Research and Development 119,839 160,950 Interest Expenses 81,901 33,041 Income Before Income Taxes (183,198) (371,718) Provision For Income Taxes - -0- -0- Net Income (183,198) (371,718) Accumulated Deficit Beginning of Period $ (4,826,104) $ (4,090,776) Accumulated Deficit End of Period $ (4,937,826) $ (4,462,494) Net Income (Loss) Applicable to Common Shares $ (255,273) $ (456,256) Earnings Per Share Data: Net Income (Loss) $ ( 0.04) $ (0.09) Weighted Average Number of Common Shares Outstanding 5,395,829 4,912,130 The accompanying notes are an integral part of these financial statements. Advanced Medical Products Inc. Statement of Cash Flows Nine Months Ended March 31, 1998 March. 31, 1997 (unaudited) (unaudited) Cash flows from operating activities: Net Income $ ( 183,405) $ ( 371,718) 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 111,253 93,491 Bad debt expense 47,139 -0- Provision for doubtful accounts (1,595) 20,691 Change in assets and liabilities: Accounts receivable ( 70,960) 123,204 Inventory ( 28,007) 18,775 Other assets ( 70,839) 57,644 Accounts payable 32,726 66,442 Other liabilities ( 13,826) ( 158,982) Total adjustments 5,891 229,078 Net cash provided (used) by operating activities ( 177,514) ( 142,640) Cash flows used by investing activities: Capital expenditures - -0- ( 54,722) Proceeds from sale of equipment - -0- 1,500 Capitalization of software costs ( 1,756) ( 41,365) Net cash used by investing activities ( 1,756) ( 94,587) Cash flows provided (used) by financing activities: Proceeds from loan from stockholder - -0- 100,000 Net proceeds from sale of common stock 257,898 -0- Net proceeds (payments) on short term debt ( 50,792) 220,552 Payments on long-term debt ( 29,588) ( 38,616) Net cash provided (used) by financing activities 177,518 281,936 Net increase (decrease) in cash ( 1,752) 44,709 Cash, beginning of period 50,938 14,631 Cash, end of period $ 49,186 $ 59,340 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 68,822 $ 33,041 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 nine months period ended March 31, 1998 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 March 31, 1997 June 30, 1997 Inventory consisted of: (unaudited) Raw materials and work in process $ 315,834 $ 305,188 Finished goods 224,984 207,624 $ 540,818 $ 512,812 3. Other Current Assets Prepaid expenses $ 33,132 $ 41,041 Deposits current 4,962 4,962 Deferred taxes 9,914 9,914 Notes receivable 80,000 -0- Advances - -0- 1,250 $ 128,008 $ 57,168 Other Current Liabilities Accrued royalties $ 23,729 $ 39,593 Accrued vacation pay 15,132 25,362 Deferred service contract revenue 163,628 125,200 Warranty reserve 15,645 26,489 Accrued sales tax liability 12,548 25,084 Other 2,500 -0- $ 233,172 $ 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 March 31, 1998, $18,982 in interest was due, in addition to the principle. 5. Short Term Debt 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 March 31, 1998, $ 383,633 was borrowed by the Company under this agreement. 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 March 31, 1998 was $ 43,576. 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 March 31, 1998. 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 $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. 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 $616,092 and $1,645,896 for the quarter and nine months ended March 31, 1998 represent a 6% and 24% decrease from sales of $656,997 and $2,165,840 in the comparable periods of 1997. These decreases were due to lower sales to existing OEM/International customers as well as to domestic customers. Gross profit margins on sales were 50.5% of net sales for the quarter and 50.3% for the nine months ended March 31, 1998. The improvement from a gross margin of approximately 49% reported for the first nine months of 1997 resulted from lower unabsorbed fixed costs. Selling, general and administrative expenses of $262,088 for the quarter and $809,664 for the nine months ended March 31, 1998 were 42.5% and 49.2% of net sales compared to expenses of $343,366 and $1,248,727 or 52.3% and 57.7 % of net sales for the same periods last year. Total selling, general and administrative expenses were approximately 24% lower than they were in the third quarter and 35% lower than in the first nine months of fiscal 1997. This is due to lower commissions and continuing efforts to cut and control costs company-wide. Research and development costs during the first nine months of fiscal 1998 were reduced 25% from last year. This is a result of efforts to decrease expenses company-wide. Net losses for the quarter and nine months ended March 31, 1998 were $17,059 and $183,198 respectively compared to losses of $80,007 and $371,718 for the same periods last year. These substantially reduced losses despite lower sales are a direct result of efforts to reduce costs company-wide. Interest expenses of $22,942 for the third quarter of 1998 and $81,901 for the first nine months of 1998 were up substantially from the $15,675 and $33,041 spent on interest expense for the corresponding quarters last year. These higher interest expenses are a direct result of higher borrowing levels under the Company's credit line with Emergent Financial Group. During the first nine months of fiscal 1998, accounts receivable increased by $25,416 and inventory increased by $28,006. Accounts payable increased by $22,725. Liquidity and Capital Resources Operating activities used $177,514 of cash during the nine months ended March 31, 1998. This compared to $142,640 used during the nine months of fiscal 1997. However, capital expenditures used only $1,756 during the first nine months of fiscal 1998 compared to $94,587 in capital expenditures during the first nine months of 1997. 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 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 Companys 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: EX-27 2
5 9-MOS JUN-30-1998 MAR-31-1998 49,186 0 609,328 (29,360) 540,818 1,297,979 262,965 0 1,569,457 1,300,748 0 0 2,289,410 59,625 (2,453,917) 1,569,457 616,092 1,645,896 304,741 817,789 929,503 0 81,901 (183,198) 0 0 0 0 0 (183,198) 0 0
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