-----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, GG5JrXxxtYScOXW5jjdI+g93ERHIlfU4eJetGVq54FB1HOKVYDGPKB2qsg0n9wny Iq0K/vgvFr88lc8uMnXjYw== 0000807732-97-000003.txt : 19970222 0000807732-97-000003.hdr.sgml : 19970222 ACCESSION NUMBER: 0000807732-97-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 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: 1934 Act SEC FILE NUMBER: 000-16341 FILM NUMBER: 97529842 BUSINESS ADDRESS: STREET 1: 111 RESEARCH DR CITY: COLUMBIA STATE: SC ZIP: 29223 BUSINESS PHONE: 8039350906 MAIL ADDRESS: STREET 1: 111 RESEARCH DR CITY: COLUMBIA STATE: SC ZIP: 29223 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(d) of the Securities Exchange Act of 1934 For the quarterly period ended DECEMBER 31, 1996 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) DELAWARE 16-1284228 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 6 WOODCROSS DRIVE, COLUMBIA, SOUTH CAROLINA 29212 (Address of Principal Executive Offices) (Zip Code) (803) 407-3044 (Issuer's 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 issuer's classes of common equity, as of the latest practicable date: 5,112,495 at January 31, 1997. (1) PART 1 - FINANCIAL INFORMATION Item 1 - Financial Statements ADVANCED MEDICAL PRODUCTS, INC. BALANCE SHEET DEC. 31, 1996 JUNE 30, 1996 (unaudited) (audited) ASSETS CURRENT ASSETS: Cash $ 19,204 $ 14,631 Accounts Receivable (net of allowance for doubtful accounts of $21,421 and $42,046 respectively) 520,578 547,441 Refundable Income Taxes 23,914 82,854 Inventory (Note 2) 751,669 749,770 Other Current Assets (Note 3) 50,317 34,241 Total Current Assets 1,365,682 1,428,937 Furniture and Equipment, Net 344,693 345,993 Product Software Costs, Net 89,318 77,225 Other Assets - Deposits 6,272 1,792 Total Assets $1,805,965 $1,853,947 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Credit Line Payable (Note 6) $ 304,877 $ -0- Loan From Shareholder (Note 5) 101,500 -0- Accounts Payable 546,811 561,753 Current Portion Long-Term Debt (Note 6) 27,927 35,637 Accrued Wages and Commissions 103,433 121,014 Obligation - C. Groff (Note 5) -0- 56,795 Other Current Liabilities (Note 4) 287,805 334,062 Total Current Liabilities 1,372,353 1,109,261 Dividends Payable 2,650 51,000 Long-Term Liabilities: Long-Term Debt, Net of Current Portion (Note 6) 72,574 251,107 Total Liabilities 1,447,577 1,411,368 Stockholders' Equity: Class A Preferred Stock, no par value; authorized 4,000 shares; issued and outstanding 2,273 shares (Note 7) 2,185,410 2,026,247 Common Stock, $0.01 par value; authorized 7,000,000 shares, 5,112,495 shares issued and outstanding at December 31, 1996 and authorized 5,000,000 shares, 4,837,875 issued and outstanding at June 30, 1996 51,125 48,379 Subscription Common Stock (Note 7) -0- 102,000 Subscription Preferred Stock (Note 7) 104,000 -0- Additional Paid In Capital 2,400,340 2,356,729 Accumulated Deficit (4,382,487) (4,090,776) Total Stockholders' Equity 358,388 442,579 Total Liabilities and Stockholders' Equity $1,805,965 $1,853,947 ========= ========= The accompanying notes are an integral part of these financial statements. (2) ADVANCED MEDICAL PRODUCTS, INC. STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT THREE MONTHS ENDED DEC. 31, 1996 DEC. 31, 1995 (unaudited) (unaudited) Net Sales $ 715,155 $1,072,857 Cost of Sales 457,022 650,991 Gross Profit 258,133 421,866 Selling, General and Administrative 493,378 757,335 Research and Development 64,340 115,415 Interest Expenses 12,144 1,685 Loss Before Income Taxes ( 311,729) ( 452,569) Provision For Income Taxes -0- -0- Net Loss ( 311,729) ( 452,569) Accumulated Deficit - Beginning of Period (4,070,758) (2,990,419) Accretion of Redeemable Preferred Stock -0- ( 3,241) Accumulated Deficit - End of Period $(4,382,487) $(3,446,229) ========= ========= Net Income (Loss) Applicable to Common Shares $( 340,142) $( 480,810) ========= ========= Earnings Per Share Data: Net Income (Loss) $( 0.07) $ ( 0.18) ========= ========= Weighted Average Number of Common Shares Outstanding 4,815,756 2,673,225 The accompanying notes are an integral part of these financial statements. (3) ADVANCED MEDICAL PRODUCTS, INC. STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT SIX MONTHS ENDED DEC. 31, 1996 DEC. 31, 1995 (unaudited) (unaudited) Net Sales $ 1,508,844 $ 2,385,736 Cost of Sales 758,336 1,274,846 Gross Profit 750,508 1,110,890 Selling, General and Administrative 906,855 1,324,601 Research and Development 119,493 181,844 Interest Expenses 15,871 3,557 Loss Before Income Taxes ( 291,711) ( 399,112) Provision for Income Taxes -0- -0- Net Loss ( 291,711) ( 399,112) Accumulated Deficit-Beginning of Period (4,090,776) (3,040,635) Accretion of Redeemable Preferred Stock -0- ( 6,482) Accumulated Deficit-End of Period $(4,382,487) $(3,446,229) ========= ========= Net Loss Applicable to Common Shares $( 346,536) $( 455,594) ========= ========= Earnings Per Common Share Data: Net Loss $( .07) $( .17) ========= ========= Weighted Average Number of Common Shares Outstanding 4,814,126 2,673,225 The accompanying notes are an integral part of these financial statements. (4) ADVANCED MEDICAL PRODUCTS, INC. STATEMENT OF CASH FLOWS SIX MONTHS ENDED DEC. 31, 1996 DEC. 31, 1995 (unaudited) (unaudited) Cash Flows from Operating Activities: Net Loss $( 291,711) $( 399,112) Adjustments To Reconcile Net Income To Net Cash Used By Operating Activities: Loss on Disposal of Fixed Assets 7,813 -0- Depreciation and Amortization 58,748 48,648 Bad Debt Expense 12,000 394 Provision for Doubtful Accounts ( 20,625) ( 9,753) Change in Assets and Liabilities: Accounts Receivable 47,488 ( 35,659) Inventory ( 1,899) 179,451 Refundable Income Taxes 58,940 -0- Other Current Assets ( 16,076) -0- Other Assets ( 4,480) 24,689 Accounts Payable ( 14,942) ( 26,197) Other Current Liabilities ( 120,633) 176,573 Total Adjustments 6,334 358,146 Net Cash Used By Operating Activities ( 285,377) ( 40,966) Cash Flows Used By Investing Activities: Capital Expenditures ( 54,161) ( 36,268) Proceeds from Sale of Equipment 1,500 -0- Capitalization of Software Costs ( 24,860) ( -0-) Net Cash Used by Investing Activities ( 77,521) ( 36,268) Cash Flows Provided (Used) By Financing Activities: Proceeds From Loan From Shareholder 150,000 -0- Proceeds from Credit Line 1,026,973 -0- Payments on Short-Term Debt ( 790,132) -0- Payments on Long-Term Debt ( 19,370) ( 19,780) Net Cash Provided (Used) By Financing Activities 367,471 ( 19,780) Net Increase (Decrease) In Cash 4,573 ( 97,014) Cash, Beginning Of Period 14,631 32,411 Cash, End Of Period $ 19,204 $ ( 64,903) ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 15,871 $ 3,557 Income Taxes -0- -0- The accompanying notes are an integral part of these financial statements. (5) 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 six month period ended December 31, 1996 are not necessarily indicative of the results that may be expected for fiscal year 1997. The unaudited condensed financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended June 30, 1996. 2. Inventory Inventory consisted of: DEC. 31, 1996 JUNE 30, 1996 (unaudited) (audited) Raw Materials and Work In Process $ 399,858 $ 453,849 Finished Goods 351,811 295,921 $ 751,669 $ 749,770 ========= ========= 3. Other Current Assets Prepaid Expenses $ 45,355 Deposits - Current 4,962 $ 50,317 ========= 4. Other Current Liabilities Accrued Royalties $ 42,798 Obligation - Keshler 7,500 Accrued Vacation Pay 23,205 Deferred Service Contract Revenue 134,762 Warranty Reserve 23,249 Accrued Sales Tax Liability 56,291 $ 287,805 ========= 5. Related Party Transactions On January 12, 1996, Clarence P. Groff, the Company's former largest stockholder resigned. At that time Mr. Groff entered into a termination agreement with the Company whereby he agreed to waive his rights and terminate a prior employment agreement and the Company agreed to pay Mr. Groff a severance package. This obligation paid in full as of December 31, 1996. Also as part of the agreement, the Company agreed to indemnify Mr. Groff for actions as an officer, director, employee, and agent of the Company to the fullest extent permitted under the General Corporation Law of Delaware. In Consideration of the above, Mr. Groff agreed to a Confidentiality and Non-Disclosure; Non-Compete; No Recruiting Covenant. (6) 5. Related Party Transactions Continued Carolina Medical, a stockholder of the Company entered into a Licensing Agreement to utilize, for a fee the technology embodied in the Company's Micros QV portable hand-held ultrasound product line for other applications that will not be directly competitive with the Company's current applications. Royalties will be paid to the Company by Carolina Medical on any future sales of Carolina Medical's products utilizing the Micros QV technology. Effective July 1, 1996, the Company entered into a 90 day loan agreement with BIOTEL International, the Company's largest shareholder, under which the Company borrowed $150,000 at 12 percent annual rate of interest. This note was originally set to mature September 30, 1996. The Company repaid $50,000 against this note on December 31, 1996 and $100,000 was converted into a long-term note due to mature December 31, 1997. The balance on this note as of December 31, 1996, including interest due, was $101,500. 6. Notes Payable 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, accrues interest at 11 percent, and is secured by furniture, fixtures, and equipment. The balance as of December 31, 1996 was $63,214. 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 will be repaid in 12 monthly installments of $913, accrues interest at 11 percent and is secured by equipment, furniture and fixtures. The balance as of December 31, 1996 was $3,927. 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 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 as follows: .75% of the average daily balance for the first 60 days, .50% for the next 60 days, and .375% thereafter. This sliding fee scale is contingent upon certain performances as defined in the agreement. The balance on this credit line at December 31, 1996 was $304,877. 7. Capital Stock Transactions On August 29, 1996, the Company was released from a fifteen year lease with SCANA, the Company's landlord. SCANA received 160 shares of the Company's Class A Preferred Stock as payment in full of the delinquent lease payments of approximately $160,000. (7) 7. Capital Stock Transactions Continued Nishimoto Sangyo, one of the Company's preferred stockholders, 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 were issued December 31, 1996. They also entered into an agreement to convert $104,000 of their December 31, 1996 preferred stock dividend into 104 shares of $1,000 face value preferred stock. This amount has been reflected in the financial statements as a preferred stock subscription as the shares were not issued at December 31, 1996. 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. (8) ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net sales of $1,508,844 for the six months ended December 31, 1996 represent a 37% decrease from sales of $2,385,736 in the comparable six month period of fiscal 1996. Net sales of $715,155 for the quarter ended December 31, 1996 represent a 33% decrease from sales of $1,072,857 for the quarter ended December 31, 1995. This decrease resulted from lower sales to existing OEM/ International customers, particularly Nishimoto Sangyo, due principally to the delay in the completion of Windows based software. Current efforts to expand the OEM/International sales are in process and the first marketable version of the Windows based software has been released. It is expected that these will result in increased future sales. The Company's gross profit margin increased to 50% of net sales for the six month period ended December 31, 1996 from 46% of net sales in the comparable six months ended December 31, 1995. This increase is due to efforts to reduce sales discounts and manufacturing costs. The gross profit margin decreased from 39% of net sales in the second quarter of fiscal 1996 to 36% of net sales in the second quarter of fiscal 1997. The apparent decrease in the gross profit margin from the first quarter of fiscal 1997 to the second quarter of fiscal 1997 was due to adjustments made in the second quarter for unabsorbed overhead under the new standard cost system. Selling, general and administrative expenses of $906,855 for the six months ended December 31, 1996 were 60% of net sales for the period compared to expenses of $1,324,601 or 55% of net sales for the same period last year. These expenses decreased from 71% of net sales in the second quarter of fiscal 1996 to 69% of net sales in the second quarter of fiscal 1997. These expenses were still a high percentage of net sales, but actual expenses were reduced by 31% and 34% from what they were in the first six months and second quarter of fiscal 1996 respectively. This is due to lower commissions and efforts to cut and control fixed costs company wide. The fiscal 1997 figure also includes $39,362 in write-offs of obsolete sales demonstration equipment inventory and $21,379 in uncapitalizable moving expenses incurred to move the business to substantially lower cost facilities. Not including these one time costs, the comparable selling, general and administrative expenses would have been 36% and 43% less than in the first six months and second quarter of fiscal 1996 respectively. Research and development costs during the first six months of fiscal 1997 decreased 34% from last year. During the second quarter these costs decreased 56% from the comparable period last year. This is a result of efforts to decrease expenses company wide and was able to be done because of the current stage of completion of the development of the Company's Micros QV product. Net loss for the six months ended December 31, 1996 was $(291,711) compared to $(399,112) for the same period last year. For the quarter ended December 31, 1996 the net loss decreased to $(311,729) from $(452,569) in the second quarter ended December 31, 1995. The net loss for the first six months and second quarter of fiscal 1997 primarily resulted from high fixed selling, general and administrative expenses for the lower level of sales achieved, much lower international sales (which have very low selling expense and are therefore more profitable than domestic sales), the (9) differences in gross profit margin as explained above, write-offs of obsolete inventory, and expenses incurred in November 1996 to relocate the company to a new lower cost facility. The decrease in net loss compared to the first six months and second quarter of last year despite lower sales levels was primarily the result of lower expenses company wide. During the first six months of fiscal 1997, accounts receivable decreased slightly from $547,441 to $520,578. Total inventory remained about the same at $751,669; Inventory write-offs and reductions in Holter monitor inventory were offset by a buildup in inventory of nearly $125,000 for the new Micros QV product. LIQUIDITY AND CAPITAL RESERVES Operating activities used $285,377 of cash during the six months ended December 31, 1996 compared with $40,966 used during the six months ended December 31, 1995. The increase is due primarily to efforts to decrease accounts payable, and marketing and inventory costs for the Company's Micros QV hand-held portable ultrasound unit. In the first six months of fiscal 1997, $77,521 was used for capital expenditures, compared to $36,268 for the same period last year. This increase is primarily due to leasehold improvements of the Company's new facility and capitalized software costs for the Company's Windows based software. On March 12, 1996 the Company restructured eight of it's operating leases, as well as, a long-term unsecured note with a Syracuse, New York bank into one long-term note. On June 1, 1996 the Company restructured five of it's operating leases with a Syracuse, New York leasing company into a twelve month note (See Note 6 to the financial statements). The past due lease payments on these two notes totaling approximately $100,500 were forgiven and recorded in the Company's audited June 30, 1996 financial statements as an extraordinary item in accordance with generally accepted accounting principals. On July 1, 1996, BIOTEL International, a shareholder of the Company provided the Company with a credit facility of up to $150,000 (See Note 5 to the financial statements). As of October 31, 1996, the Company was released from a fifteen year lease, with SCANA, that represented a future long-term lease liability of $1,676,272. The annual lease payments on the Company's principal place of business under this lease were $156,100 and were scheduled to escalate over the remaining term of the lease. SCANA received 160 shares of the Company's Class A Preferred Stock (See Note 7 to the financial statements) as payment in full of the delinquent lease payments of approximately $160,000. The Company entered into a five-year lease agreement including an option to purchase with T & L A Partnership which commenced November 1, 1996. These annual lease payments total approximately $89,000 (an annual savings of approximately $67,000) and represent a future long-term lease liability of approximately $355,000, down from $1,676,272. During the first six months of fiscal 1997, 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 6 to the financial statements). (10) Subsequent to December 31, 1996, the Company has further downsized resulting in an approximate annual savings in salaries, wages and benefits of $336,000. Management believes that these cuts will bring costs in line with revenues. Now that Phase I of "Windows" software has been released, and the Micros Q.V. product is available for sale, the Company expects to see some recovery from the declined in sales, both domestically and internationally. Higher sales, particularly more profitable international sales, coupled with lower fixed costs should enable the Company to operate profitably. The Company believes that internally generated funds and existing credit facilities may not provide sufficient working capital to meet present and future commitments. In order to improve its cash flow position, the Company has undertaken steps internally to further improve gross margins and reduce fixed costs. In addition, the Company is actively seeking additional financing through a private placement sale of its securities. The Company currently does not have specific plans for major capital expenditures in fiscal 1997. Should needs arise, the Company may consider additional capital sources to obtain funding. (11) 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. (12) SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANCED MEDICAL PRODUCTS, INC. (REGISTRANT) BY:S/ RONALD G. MOYER RONALD G. MOYER PRESIDENT DATED: JANUARY 31, 1997 (13) SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANCED MEDICAL PRODUCTS, INC. (REGISTRANT) BY: RONALD G. MOYER PRESIDENT DATED: JANUARY 31, 1997 (14) EX-27 2
5 6-MOS JUN-30-1997 DEC-31-1996 19204 0 541,999 21,421 751,669 74,231 1,103,185 758,493 1,805,965 1,372,353 0 51,125 0 2,289,410 2,400,340 1,805,965 1,508,844 1,508,844 758,336 758,336 1,026,348 0 15,871 (291,711) (291,711) (291,711) 0 0 0 (291,711) (.07) (.07)
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