-----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, TbUDL85P24YH/hf46iES2a/kxjkfE3NS1LyQvtHNTMxsygcoM7YAX3wT3fFxLeCb 0ynd9gH8FIGlm3Vq75pClw== 0000807732-98-000027.txt : 19980723 0000807732-98-000027.hdr.sgml : 19980723 ACCESSION NUMBER: 0000807732-98-000027 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980721 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/A SEC ACT: SEC FILE NUMBER: 000-16341 FILM NUMBER: 98669064 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/A 1 AMENDED 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 December 31, 1997. _____ 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 May 17, 1998. PART 1 FINANCIAL INFORMATION Item 1 Financial Statements Advanced Medical Products Inc. Balance Sheet Dec. 31, 1997 June 30, 1997 (unaudited) ASSETS CURRENT ASSETS: Cash $ 26,144 $ 50,938 Accounts Receivable (net of allowance for doubtful Accounts of $19,276 and $30,954 respectively) 392,286 554,552 Inventory (Note 2) 516,203 512,812 Other Current Assets (Note 3) 119,296 57,168 Total Current Assets 1,039,056 1,175,470 Furniture and Equipment, Net 230,423 282,384 Product Software Costs, Net 69,626 90,078 Other Assets Deposits 8,512 8,512 Total Assets 1,362,491 1,556,444 LIABILITIES AND STOCKHOLDERS EQUITY: Current Liabilities: Notes Payable (Note 5) $ 351,809 $ 603,407 Accounts Payable 413,815 510,324 Current Portion Long-Term Debt (Note 6) 24,000 24,000 Accrued Wages and Commissions 73,854 89,949 Other Current Liabilities (Note 4) 208,654 254,961 Total Current Liabilities 1,072,132 1,482,641 Dividends Payable on Preferred Stock 121,288 61,860 Long-Term Liabilities: Long-Term Debt, Net of Current Portion (Note 6) 226,973 102,181 Total Liabilities 1,420,395 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 2,530,888 2,340,915 Accumulated Deficit (4,937,826) (4,771,688) Stockholders Equity (57,904) (90,238) Total Liabilities and Stockholders Equity $ 1,362,491 $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 Dec. 31, 1997 Dec. 31, 1996 (unaudited) (unaudited) Net Sales $ 500,466 $ 715,155 Cost of Sales 242,561 457,022 Gross Profit 257,905 258,133 Selling, General and Administrative 287,825 493,378 Research and Development 49,784 64,340 Interest Expenses 32,018 12,144 Income Before Income Taxes ( 111,722) ( 311,729) Provision For Income Taxes -0- -0- Net Income ( 111,722) ( 311,729) Accumulated Deficit Beginning of Period (4,826,104) ( 4,070,758) Accumulated Deficit End of Period (4,937,826) $ ( 4,382,487) Net Income (Loss) Applicable to Common Shares (141,435) $ ( 340,142) Earnings Per Share Data: Net Income (Loss) $ ( 0.02) $ ( 0.07) Weighted Average Number of Common Shares Outstanding 5,679,162 4,815,756 The accompanying notes are an integral part of these financial statements. Advanced Medical Products Inc. Statement of Operations and Accumulated Deficit Six Months Ended Dec. 31, 1997 Dec. 31, 1996 (unaudited) (unaudited) Net Sales $ 1,029,804 $ 1,508,844 Cost of Sales 513,048 758,336 Gross Profit 516,756 750,508 Selling, General and Administrative 547,576 906,855 Research and Development 75,939 119,493 Interest Expenses 59,380 15,871 Income Before Income Taxes (166,139) (291,711) Provision For Income Taxes -0- -0- Net Income (166,139) (291,711) Accumulated Deficit Beginning of Period $ (4,826,104) $ (4,090,776) Accumulated Deficit End of Period $ (4,937,826) $ (4,382,487) Net Income (Loss) Applicable to Common Shares $ (225,565) $ (346,536) Earnings Per Share Data: Net Income (Loss) $ ( 0.04) $ (0.07) Weighted Average Number of Common Shares Outstanding 5,395,829 4,814,126 The accompanying notes are an integral part of these financial statements. Advanced Medical Products Inc. Statement of Cash Flows Six Months Ended Dec. 31, 1997 Dec. 31, 1996 (unaudited) (unaudited) Cash flows from operating activities: Net Income $ ( 166,139) $ ( 291,711) 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 74,169 58,748 Bad debt expense 42,000 12,000 Provision for doubtful accounts (11,678) ( 20,625) Change in assets and liabilities: Accounts receivable 131,944 47,488 Inventory ( 3,392) ( 1,899) Refundable income taxes -0- 58,940 Other current assets ( 62,128) ( 16,076) Other assets -0- ( 4,480) Accounts payable ( 96,509) ( 14,942) Other current liabilities ( 62,402) ( 120,633) Total adjustments 26,878 ( 6,334) Net cash provided (used) by operating activities( 154,135) ( 285,377) Cash flows used by investing activities: Capital expenditures -0- ( 54,161) Proceeds from sale of equipment -0- 1,500 Capitalization of software costs ( 1,756) ( 24,860) Net cash used by investing activities ( 1,756) ( 77,521) Cash flows provided (used) by financing activities: Proceeds from loan from stockholder -0- 150,000 Net proceeds from sale of common stock 257,898 -0- Net proceeds (payments) on short term debt ( 101,598) 236,841 Payments on long-term debt ( 25,203) ( 19,370) Net cash provided (used) by financing activities 131,097 367,471 Net increase (decrease) in cash ( 24,794) 4,573 Cash, beginning of period 50,938 14,631 Cash, end of period $ 26,144 $ 19,204 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 50,380 $ 15,871 Income taxes -0- -0- 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, 1997 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 Dec. 31, 1997 June 30, 1997 Inventory consisted of: (unaudited) (audited) Raw materials and work in process $ 304,515 $ 305,188 Finished goods 211,688 207,624 $ 516,756 $ 512,812 3. Other Current Assets Prepaid expenses $ 24,420 $ 41,041 Deposits current 4,962 4,962 Deferred taxes 9,914 9,914 Notes receivable 80,000 -0- Advances -0- 1,250 $ 119,296 $ 57,168 Other Current Liabilities Accrued royalties $ 32,017 $ 39,593 Accrued vacation pay 14,858 25,362 Deferred service contract revenue 128,055 125,200 Warranty reserve 18,546 26,489 Accrued sales tax liability 12,678 25,084 Other 2,500 -0- $ 208,654 $ 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 December 31, 1997, $14,482 in interest was due, in addition to the principle. 5. 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 December 31, 1997 was $ 47,960. 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 December 31, 1997. 6. 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. 7. Subsequent Events 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 December 31, 1997, $ 337,327 was borrowed by the Company under this agreement. 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 $500,466 and $1,029,804 for the quarter and six months ended December 31, 1997 represent a 30% and 32% decrease from sales of $751,155 and $1,508,844 in the comparable periods of 1996. These decreases were due to lower sales to existing OEM/International customers, as well as to domestic customers. Gross profit margins on sales were 51.5% of net sales for the quarter and 50.2% for the six months ended December 31, 1997. The inprovement from a 49.7% gross margin reported for the first six months of 1996 resulted from lower unabsorbed fixed costs despite the lower level of sales. Selling, general and administrative expenses of $287,825 for the quarter and $547,576 for the six months ended December 31, 1997 were 57.4% and 53.2% of net sales compared to expenses of $493,378 and $906,000 or 69% and 60.1 % of net sales for the same periods last year. Total selling, general and administrative expenses were approximately 40% lower than they were in the second quarter and first half of fiscal 1996. This is due to lower commissions and efforts to cut and control costs company wide. Research and development costs during the second quarter and first six months of fiscal 1997 were reduced 22.7% and 36.9% respectively from last year. This is a result of efforts to decrease expenses company-wide. Net losses for the quarter and six months ended December 31, 1997 were $111,722 and $166,139 respectively compared to losses of $311,729 and $291,711 for the same periods last year. These substantially reduced losses despite substantially lower sales are a direct result of efforts to reduce costs company-wide. During the first six months of fiscal 1997, accounts receivable decreased from $554,552 at June 30, 1997 to $392,286 at December 31, 1997. Inventory increased slightly from $512,812 to $516,203 at December 31, 1997. Liquidity and Capital Resources Operating activities provided $92,676 and used $154,135 of cash during the quarter and six months ended December 31, 1997. This compared to $68,412 used during the quarter and $285,377 used during the six months ended December 31, 1996. In the second quarter and first six months of fiscal 1997, capital expenditures were $1,759 compared to $19,609 and $77,521 spent for the same periods last year. Subsequent to quarter ended September 30, 1996, 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 8 to the financial statements). Interest costs have increased because of debt incurred. 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. Since December 31, 1997 the Company has been in violation of its preferred stock agreements with Nishimoto-Sangyo Company, Ltd. and SCANA Corporation, the Company's 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 6-MOS JUN-30-1998 DEC-31-1997 26,144 0 442,516 (50,230) 516,203 1,039,056 300,049 74,169 1,362,491 1,072,132 0 0 2,289,410 59,625 2,530,888 1,362,491 1,029,804 1,029,804 513,048 513,048 623,515 0 59,380 (166,139) 0 0 0 0 0 (166,139) (.04) (.04)
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