-----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, BT+kYt5uMHXWFVO6kA0YNnQTm+lBIDi5r2119y5ezTDR51QZVefYyP+wausFZ5w9 nmd2oogfrY6ovQeCPB/mCg== 0000807732-97-000005.txt : 19970509 0000807732-97-000005.hdr.sgml : 19970509 ACCESSION NUMBER: 0000807732-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 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: 97598001 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 March 31, 1996 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act 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 shares at May 6, 1997. (1) ADVANCED MEDICAL PRODUCTS INC. BALANCE SHEET Mar. 31, 1997 June 30, 1996 (unaudited) (audited) ASSETS Current Assets: Cash $ 59,340 $ 14,631 Accounts receivable (net of allowance for doubtful accounts of $62,737 and $42,046 respectively) 403,546 547,441 Refundable income taxes 9,914 82,854 Inventory (Note 2) 730,995 749,770 Other current assets (Note 3) 42,817 34,241 Total current assets 1,246,612 1,428,937 Furniture and equipment, net 319,320 345,993 Product software costs, net 97,143 77,225 Other Assets - Deposits 8,512 1,792 Total Assets $1,671,587 $1,853,947 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Credit Line Payable (Note 6) $ 229,354 $ -0- Current Portion Long-Term Debt (Note 6) 24,000 35,637 Accounts payable 628,195 561,753 Accrued wages and commissions 125,530 121,014 Obligation - C. Groff (Note 5) -0- 56,795 Loan From Shareholder (Note 5) 103,000 -0- Other current liabilities (Note 4) 227,359 334,062 Total current liabilities 1,337,438 1,109,261 Dividends Payable 32,147 51,000 Long-Term Liabilities Long-term debt, net of current (Note 6) 53,333 251,107 Total long-term liabilities 53,333 251,107 Total liabilities 1,422,918 1,411,368 Stockholders' equity: Class A preferred stock, no par value; authorized 4,000 shares; issued & outstanding 2,000 shares at June 30, 1996 and 2,377 shares at March 31, 1997 (Note 7) 2,289,410 2,026,247 Common stock, $.01 par value; authorized 7,000,000 shares, 5,112,495 shares issued & outstanding at March 31, 1997 & authorized 5,000,000 shares, 4,837,875 issued & outstanding at June 30, 1996(note 7) 51,125 48,379 Subscription common stock (Note 7) -0- 102,000 Additional paid in capital 2,370,628 2,356,729 Accumulated deficit (4,462,494) (4,090,776) Total stockholders' equity 248,669 442,579 Total liabilities & stockholders' equity $ 1,671,587 $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 Nine Months Ended Mar. 31, 1997 Mar. 31 , 1996 (unaudited) (unaudited) Net sales $2,165,840 $3,259,307 Cost of sales 1,094,840 1,746,985 Gross profit 1,071,000 1,512,322 Selling, general and administrative 1,248,727 1,907,488 Research and development 160,950 248,128 Total operating expenses 1,409,677 2,155,616 Total operating income ( 338,677) ( 643,294) Interest expenses 33,041 19,816 Income (loss) before income taxes ( 371,718) ( 663,110) Provision for income taxes 0 0 Net income (loss) ( 371,718) ( 663,110) Retained deficit - beginning of period (4,090,776) (3,040,635) Accretion of redeemable preferred stock -0- ( 9,723) Accumulated deficit - end of period $(4,462,494) $(3,713,468) ========== ========== Net income (loss) applicable to common shares $( 456,256) $( 747,833) ========== ========== Earnings per common share data: Net income (loss) $ (.09) (.22) ========== ========== Weighted average number of common shares outstanding 4,912,130 3,376,018 The accompanying notes are an integral part of these financial statements. (3) ADVANCED MEDICAL PRODUCTS INC. STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT Three Months Ended Mar. 31, 1997 Mar. 31, 1996 (unaudited) (unaudited) Net sales $ 656,997 $ 873,571 Cost of sales 336,505 487,139 Gross profit 320,492 386,432 Selling, general and administrative 343,366 582,656 Research and development 41,458 51,285 Total operating expense 384,824 633,941 Income (Loss) from operations ( 64,332) ( 247,509) Interest expenses 15,675 16,489 Income (loss) before income taxes ( 80,007) ( 263,998) Provision for income taxes 0 0 Net income (loss) ( 80,007) ( 263,998) Retained deficit - beginning of period (4,382,487) (3,446,229) Accretion of redeemable preferred stock -0- ( 3,241) Accumulated deficit - end of period $(4,462,494) $(3,713,468) ========== ========== Net income (loss) applicable to common shares $( 109,720) $( 292,239) ========== ========== Earnings per common share data: Net income (loss) $ (.02) (.08) ========== ========== Weighted average number of common shares outstanding 5,112,495 3,376,018 The accompanying notes are an integral part of these financial statements. (4) ADVANCED MEDICAL PRODUCTS INC. STATEMENT OF CASH FLOWS Nine Months Ended Mar. 31, 1997 Mar. 31, 1996 (unaudited) (unaudited) Cash Flows Used By Operating Activities: Net Loss $( 371,718) $( 663,110) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 93,491 73,381 Bad Debt Expense -0- 9,892 Loss on disposal of fixed assets 7,813 -0- Provision for doubtful accounts 20,691 ( 38,049) Gain on refinancing long-term debt -0- ( 1,037) Change in assets and liabilities: Accounts receivable 123,204 ( 53,950) Inventory 18,775 162,287 Other assets 57,644 88,186 Accounts payable 66,442 ( 82,860) Other liabilities ( 158,982) 223,818 Total adjustments 229,078 393,294 Net cash used by operating activities ( 142,640) (269,816) Cash flows used by investing activities: Capital expenditures ( 54,722) ( 42,016) Proceeds from sale of equipment 1,500 -0- Capitalization of software costs ( 41,365) ( 3,880) Net cash used by investing activities ( 94,587) ( 45,896) Cash flow used by financing activities: Payments on long-term debt ( 38,616) ( 20,780) Proceeds from sale of common stock -0- 430,000 Proceeds from (payments of)loan from stockholder 100,000 ( 9,375) Proceeds from credit line 220,552 -0- Net cash provided (used) by financing activities 281,936 399,845 Net (decrease) increase in cash and cash equivalents 44,709 84,133 Cash and cash equivalents at beginning of period 14,631 32,111 Cash and cash equivalents at end of period $ 59,340 $ 116,244 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 33,041 $ 19,816 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 principles 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 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 nine month period ended March 31, 1997 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: Mar. 31, 1997 June 30, 1996 (unaudited) (audited) Raw Material and work in process $ 447,135 $ 453,849 Finished Goods 283,860 295,921 $ 730,995 $ 749,770 ========== ========== 3. Other Current Assets Prepaid Expenses $ 37,855 Deposits - Current 4,962 $ 42,817 ======= 4. Other Current Liabilities Accrued Royalties $ 49,557 Accrued Vacation Pay 12,404 Obligation - Keshler 6,000 Deferred Service Contract Revenue 113,657 Warranty Reserve 25,294 Accrued Sales Tax Liability 18,658 Note Payable Syracuse Supply 1,789 $227,359 ======= (6) 5. Related Party Transactions On January 12, 1996, Clarence P. Groff, the Company's former largest stockholder resigned from all positions with the Company. At that time Mr. Groff entered into a termination arrangement 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 was paid in full December 31, 1996. Also as part 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. 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 December 31, 1996 and $100,000 was converted into a long-term note due December 31, 1997. The balance on this note as of March 31, 1997, including interest due, was $103,000. 6. Notes Payable On March 12, 1996 the Company restructured eight operating leases and it's 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 on this note at March 31, 1997 was $58,339. On July 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 March 31, 1997 was $1,789. (7) 6. Notes Payable - Continued 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 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 March 31, 1997 was $229,354. 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. Nishimoto Sangyo, one of the Company's preferred stockholders converted $102,000 of their dividend and interest into 300,000 shares of common stock at $0.34 per share and $104,000 of their December 31, 1996 dividend into 104 shares of $1,000 face value preferred stock at December 31, 1996. 8. Earnings Per Share Earnings per common share were computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Earnings per share did not include the impact of the outstanding options since it was not significant. (8) ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net sales of $2,165,840 for the nine months ended March 31, 1997 represent a 34% decrease from sales of $3,259,307 in the comparable nine month period ended March 31, 1996. Net sales of $656,997 for the third quarter of fiscal 1997 represents a 25% decrease in sales from the comparable quarter in 1996. This decrease is 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. For the nine months ended March 31, 1997 the Company's gross profit margin increased to 49% from 46% of net sales for the period ended March 31, 1996. The gross profit margin increased to 48% of net sales in the third quarter of fiscal 1997 from 44% of net sales in the third quarter of fiscal 1996. These increases are primarily due to efforts to reduce sales discounts and manufacturing costs. Selling, general and administrative expenses of $1,248,727 for the nine months ended March 31, 1997 were 57% of net sales for the period as compared to expenses of $1,907,488 or 58% of net sales for the same period last year. These expenses decreased from 66% of net sales in the third quarter of fiscal 1996 to 52% of net sales in the third quarter of fiscal 1997. These expenses were still a high percentage of sales, but actual expenses were reduced by 35% and 58% from what they were in the first nine months and third 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 55% of net sales in the nine months ended March 31, 1997. Research and development costs during the nine months of ended March 31, 1997 decreased 36% over the comparable period in fiscal 1996. During the third quarter of fiscal 1997, research and development costs decreased 25% from the third quarter 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 nine months ended March 31, 1997 decreased to $(371,718) from $(663,110) in the nine months ended March 31, 1996. For the quarter ended March 31, 1997 the net loss decreased to $(80,007) from $(263,998) for the same period last year. The net losses for the first nine months and the third quarter of fiscal 1997 primarily resulted from high fixed operations (9) overhead, 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 differences in gross 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 nine months and third quarter of last year despite the lower sales levels was primarily the result of lower expenses company wide. During the first nine months of fiscal 1997, accounts receivable decreased from $547,441 to $403,546. This decrease is the result of lower sales levels. Total inventory remained about the same at $730,995; inventory write-offs and reduction in holter monitor inventory were offset by a buildup in inventory of nearly $125,000 for the new Micros QV product. LIQUIDITY AND CAPITAL RESOURCES Operating activities used $142,640 of cash during the nine months ended March 31, 1997 compared with $269,816 used during the first nine months of fiscal 1996. The decrease is due primarily to smaller losses, collections of accounts receivable and refundable income taxes. In the first nine months of fiscal 1997, $94,587 was used for capital expenditures, compared to $45,896 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 (8) of it's operating leases as well as a long-term unsecured note with a Syracuse, New York bank. On June 1, 1996 the Company restructured five (5) operating leases with Syracuse Supply Company of Syracuse, New York 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). The Company currently has available $50,000 on this credit facility which is secured by accounts receivable and inventory in a second position after Emergent Financial Corporation as a result of a February 1997 agreement. During the first nine 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). 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 (10) 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 & LA 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. In January 1997, the Company 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 QV product is available for sale, the Company expects to see some recovery from the decline 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 does not currently 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 - No exhibits were 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: May 6, 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: May 6, 1997 (14) EX-27 2
5 9-MOS JUN-30-1997 MAR-31-1997 59,340 0 466,289 62,737 730,995 42,817 1,571,297 767,218 1,671,587 1,337,438 0 51,125 0 2,289,410 (2,091,866) 1,671,587 2,165,840 2,165,840 1,094,840 1,094,840 1,409,677 0 33,041 (371,718) (371,718) (371,718) 0 0 0 (371,718) (.09) (.09)
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