-----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, Vntld5wGy9WmtwSNC9nQRJnTb/m6PIpHKjZQ00Z226QSwooMIFuOeXqjX/po4hKc F7LbcFufucMamTtI9nQPxQ== 0000807732-99-000017.txt : 19990630 0000807732-99-000017.hdr.sgml : 19990630 ACCESSION NUMBER: 0000807732-99-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990629 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: 99654654 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, 1999. ______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 (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: 5,962,496 at May 15, 1999. PART 1 - FINANCIAL INFORMATION Item 1 - Financial Statements Advanced Medical Products Inc. Balance Sheet March.31, 1999 June 30, 1998 (unaudited) ASSETS CURRENT ASSETS: Cash $ 28,822 $ 82,087 Accounts Receivable (net of allowance for doubtful accounts of $24,594 and $25,000) 437,024 342,040 Inventory (Note 2) 197,504 322,706 Prepaid Expenses 16,171 36,553 Total Current Assets 679,521 783,386 Furniture and Equipment, Net 170,012 250,691 Product Software Costs, Net 29,077 52,751 Other Long Term Assets (Note 3) 12,974 13,474 Total Assets 891,584 1,100,302 LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Notes Payable (Notes 6,7) $ 387,281 $ 295,798 Accounts Payable 701,695 448,548 Current Portion Long-Term Debt 170,587 30,327 Accrued Wages and Commissions 109,331 73,968 Other Current Liabilities (Note 4) 346,545 301,995 Dividends Payable on Preferred Stock -0- 162,981 Total Current Liabilities 1,715,439 1,313,617 Long-Term Liabilities: Long-Term Debt, Net of Current Portion 4,299 169,692 Total Liabilities 1,719,738 1,483,309 Stockholders' Equity: Class A Preferred Stock, no par value; authorized 4,000 shares; no shares December 31, 1998, 2,377 shares issued and outstanding at Junes 30, 1998 -0- 2,289,410 Common Stock, $0.01 par value; authorized 7,000,000 shares, 5,962,495 shares issued and outstanding at March 31, 1998 and at June 30, 1998. 59,625 59,625 Additional Paid-In Capital 4,813,468 2,486,209 Accumulated Deficit (5,701,247) (5,218,251) Total Stockholders' Equity (828,154) (383,007) Total Liabilities and Stockholders Equity $ 891,584 $1,100,302 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, 1999 March 31, 1998 (unaudited) (unaudited) Net Sales $ 575,779 $ 616,092 Cost of Sales 312,487 304,741 Gross Profit 263,292 311,351 Selling, General and Administrative 250,443 262,088 Research and Development 26,707 43,900 Interest Expenses 20,404 22,942 Income Before Income Taxes ( 34,262) ( 17,059) Provision For Income Taxes -0- -0- Net Income ( 34,262) ( 17,059) Accumulated Deficit - Beginning of Period (5,666,985) (4,937,826) Accumulated Deficit - End of Period $ (5,701,247) $ (4,955,593) Net Income (Loss) Applicable to Common Shares $ ( 34,262) $ ( 46,767) Earnings Per Share Data: Net Income (Loss) $ ( 0.01) $ ( 0.01) Weighted Average Number of Common Shares Outstanding 5,962,495 5,679,162 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, 1999 March 31, 1998 (unaudited) (unaudited) Net Sales $ 1,945,509 $ 1,645,896 Cost of Sales 1,095,028 817,789 Gross Profit 850,481 828,107 Selling, General and Administrative 978,437 761,664 Research and Development 110,888 119,839 Allowance for Doubtful Accounts 173,136 48,000 Interest Expenses 71,017 81,901 Income Before Income Taxes (482,997) (183,198) Provision For Income Taxes -0- -0- Net Income (482,997) (183,198) Accumulated Deficit - Beginning of Period $ (5,218,251) $ (4,771,688) Accumulated Deficit - End of Period $ (5,701,247) $ (5,026,961) Net Income (Loss) Applicable to Common Shares $ (482,997) $ (255,273) Earnings Per Share Data: Net Income (Loss) $ (0.08) $ (0.04) Weighted Average Number of Common Shares Outstanding 5,962,495 5,395,829 The accompanying notes are an integral part of these financial statements. Advanced Medical Products Inc. Statement of Cash Flows Nine Months Ended March 31, 1999 March 31, 1998 (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $ ( 482,997) $ ( 183,405) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 113,396 111,253 Allowance for doubtful accounts 173,186 45,544 Change in assets and liabilities: Accounts receivable (268,170) ( 70,960) Inventory 70 ( 28,007) Other assets 20,882 ( 70,839) Accounts payable 253,149 32,726 Other current liabilities 79,913 ( 13,826) Total adjustments 372,426 5,891 Net cash provided (used) by operating activities (110,571) ( 177,514) Cash flows used by investing activities: Capital expenditures -0- -0- Proceeds from sale of equipment -0- -0- Capitalization of software costs ( 9,044) ( 1,756) Net cash used by investing activities ( 9,044) ( 1,756) Cash flows provided (used) by financing activities: Net proceeds from sale of common stock -0- 257,898 Net proceeds (payments) on short term debt 91,483 ( 50,792) Payments on long-term debt ( 25,133) ( 29,588) Net cash provided (used) by financing activities 66,350 177,518 Net increase (decrease) in cash ( 53,265) ( 1,752) Cash, beginning of period 82,087 50,938 Cash, end of period $ 28,822 $ 49,186 Supplemental disclosures of cash flow information: Cash paid during the period for interest: $ 51,437 $ 68,822 Supplemental schedule of non-cash investing and financing activities: Sale of inventory $ 125,132 -0- Elimination of accrued dividends ($ 162,981) -0- Additional paid in capital $ 2,327,259 -0- Reduction of Preferred Stock ($ 2,289,710) -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 three-month period and nine-month period ended March 31, 1999 are not necessarily indicative of the results that may be expected for fiscal year 1999. 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, 1998. 2. Inventory March 31, 1999 June 30, 1998 (unaudited) Inventory consisted of: Raw materials and work in process $ 119,897 $ 162,799 Finished goods 77,607 159,899 $ 197,504 $ 322,706 3. Other Long Term Assets Product software costs net of amortization 3/31/99 of $352,098 and 6/30/98 of $332,249 $ 29,077 $ 52,751 Deposits 12,974 13,474 $ 42,151 $ 66,225 4. Other Current Liabilities March 31, 1999 June 30, 1998 Accrued royalties $ 5,725 $ 15,229 Deferred contract revenue 216,380 167,440 Warranty reserve 26,660 38,073 Accrued sales tax liability 65,938 67,419 Other 31,842 13,834 $ 346,545 $ 301,995 5. Per Share Earnings 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. 6. Related Party Transactions Effective July 1, 1996, the Company entered into a loan agreement with BioTel International, Inc (acquired in December 1997 by Carolina Medical, Inc., a majority shareholder of the Company's stock), under which the Company borrowed $150,000 at 12 percent annual rate of interest. This note, secured by a second position lien on the Company's assets, became due on September 30, 1996 but had subsequently been extended to December 31, 1998. During the nine months ended March 31, 1998, $ 9,000 was expensed for interest on this debt, but the interest was not paid. At various times between February 27, 1998 and March 22, 1999, Braemar Inc., a subsidiary of Carolina Medical, produced under the terms of a manufacturing agreement and sold to Advanced Medical quantities of ambulatory EKG and blood pressure monitors on open account net 60 day terms. Margins over direct material and labor costs in prices charged by Braemar were similar to margins charged to Braemar's unrelated third parties. Sales to Advanced Medical by Braemar totaled $554,522. Cash payments for these goods were made by Advanced Medical to Braemar totaling $245,628.28. In addition, $99,318.40 of receivables from Braemar were offset against additional overdue amounts owed by Advanced Medical to Braemar. The balance of $209,575 remained due and owing to Braemar by Advanced Medical at March 22, 1999. Between July 1, 1998 (when Biosensor and Carolina Medical merged) and March 22, 1999, Advanced Medical purchased inventory from Biosensor, at Biosensor's cost, in the amount of $88,436, which inventory Advanced Medical has resold at ordinary and normal markups. Advanced Medical has not paid Biosensor for these inventory purchases and the entire amount remained due and owing at March 22, 1999. Inter-company debt and expense has been eliminated in the consolidated financial statements. At various time between July 1, 1998 and March 30, 1999, Biosensor Corporation extended loans to Advanced Medical to enable Advanced Medical to meet payroll and other time critical cash needs. These loans, which were not evidenced by notes, totaled $192,000, which was considered by Advanced Medical as additional capital contributions. (Also see Note 8, Filing of a Motion Under U.S.A. Chapter 11 Paragraph 363 for Sale of Assets, and Note 9, Subsequent Events) 7. Credit Agreement 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 up to 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 maximum 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, 1999, $ 250,281 was borrowed by the Company under this agreement. This credit line, secured by all of the assets of the Company, expired on December 31, 1998. The Company has been substantial violation of the working capital and tangible net book value covenants of this credit agreement. The lender waived the covenant violations through December 31, 1998, but was unwilling to extend the waiver any further. Under the terms of the credit agreement, Emergent had the right to seize the assets, or to foreclose and sell all of the assets of the Company at auction to recover their loan balance. (Also see Note 8, Filing of a Motion Under U.S.A. Chapter 11 Paragraph 363 for Sale of Assets, and Note 9, Subsequent Events) 8. Filing of a Motion Under 11 U.S.C. Section 363 for Sale of Assets On March 23, 1999, after reporting that, for the quarter ended December 31, 1998 the Company had net losses of $373,173 of which $130,000 was as a result of their distributor in Europe, Kontron Instruments Ltd. filing for Administrative Receivership, Advanced Medical Products, Inc. filed a motion with the Federal Bankruptcy Court, District of South Carolina, for an order authorizing the sale of all assets, including equipment, inventory, and accounts receivable, outside the ordinary course of business, free and clear of all liens and encumbrances and other interests, pursuant to 11 U.S.C. Section 363 of the bankruptcy code. Biosensor Corporation, owner of Carolina Medical, Inc., who owns 55.3% of the common stock of Advanced Medical Products, Inc., proposed to purchase the assets and assume all of the secured debt, employee and commission liabilities, and all customer warranty and service liabilities of Advanced Medical Products. In addition, Biosensor proposed to make a payment of $68,000 toward administrative expenses and the amount owed by Advanced Medical to outside unsecured creditors. If it was the successful bidder on the assets, Biosensor and its affiliates agreed not to participate in distribution of payments toward unsecured claims. Biosensor's unsecured claims exceed unsecured claims by all non-affiliated creditors combined. Biosensor had been funding the losses incurred by Advanced Medical Products, Inc. and indicated its inability to continue doing so. Advanced Medical Products, Inc. continued to operate as debtor in possession, pending sale of the assets. Emergent Asset Based Lending, L.L.C., Advanced Medical's principle secured lender whose loan agreement has been in default since December, agreed to continue to lend against receivables and inventory based on Biosensor's guarantee of the debt. As of March 22, 1999, $ 253,446 was borrowed by Advanced Medical under this agreement. 9. Subsequent Events On May 3, 1999, the United State Bankruptcy Court for the District of South Carolina entered and order approving the Disclosure Statement filed on March 23, 1999, fixing June 11, 1999 as the last day for filing ballots accepting or rejecting the Plan of Reorganization, and setting June 21, 1999 as the date of the hearing on the confirmation of the Plan. On May 11, 1999, pursuant to a court order entered on May 10, 1999 in the Federal Bankruptcy Court for the District of South Carolina, Advanced Medical Products, Inc. sold all assets, including equipment, inventory, and accounts receivable, outside the ordinary course of business, free and clear of all liens and encumbrances and other interests, pursuant to 11 U.S.C. Section 363 of the bankruptcy code. Biosensor Corporation purchased the assets and assumed all of the secured debt, employee and commission liabilities, and all customer warranty and service liabilities of Advanced Medical Products, Inc. In addition, Biosensor made a payment of $68,000 for certain priority claims and administrative expenses, and for distribution to outside unsecured creditors. Biosensor and its subsidiaries agreed not to participate in distribution of payments toward unsecured claims, although their claims exceeded unsecured claims by all non-affiliated creditors combined. The assets and liabilities of Advanced Medical will be consolidated with the operating assets and liabilities of Biosensor, and the assets and liabilities of Diagnostic Monitoring purchased by Biosensor from Cardiac Science Inc. on December 31, 1998, into Advanced Biosensor, Inc., a new wholly owned subsidiary of Biosensor, which also agreed to assume Advanced Medical's lease obligations and to continue to operate the business at the present Columbia, SC location. At a hearing held on June 21, 1999 the Plan of Reorganization, as amended, was confirmed. The Plan had previously been approved by all classes of creditors. On June 28, 1999 the United State Bankruptcy Court for the District of South Carolina entered an order confirming the Plan of Reorganization. ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS Forward Looking Statements This and other sections of this report contain "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which represent the Company's expectations concerning future events including future cash flows, results of operations, expected continuing availability of the credit line, the Company's continuing ability to sell its Holter and ambulatory blood pressure products to office practices, and the Company's belief regarding future recovery from declining revenues in the medical device industry. By their very nature, forward-looking statements are subject to known and unknown risks and uncertainties relating to the Company's future performance that may cause actual results to differ materially from those expressed or implied in such forward-looking statements. The Company does not undertake and assumes no obligation to update any forward-looking statement that may be made herein or from time to time by or on behalf of the Company. The following discussion should be read in conjunction with the accompanying Financial Statements, including the notes thereto, appearing elsewhere herein. Results of Operations Net sales of $575,779, and $1,945,509 for the quarter and nine months ended March 31, 1999 represent a 6.5% decrease and 18% increase from sales of $616,092 and $1,645,896 in the comparable periods of fiscal 1998. These nine months increases was primarily the result of results achieved during the first six months under an agreement entered into in July 1998 between the Company and Biosensor Corporation, the Company's majority shareholder, authorizing the Company to purchase and resell Biosensor's cardiac monitoring products along with Advanced Medical products through both companies' existing OEM/International distributors, as well as to domestic customers. However, during the quarter ended March 31, 1999 the Company was not able to sustain the first six months sales growth due to a lack of working capital and other related factors (see notes 8 and 9). Gross profit margins on sales were 46% of net sales for the quarter and 44% for the nine months ended March 31, 1999, down from 50% gross margin reported for the quarter and nine months ended December 31, 1998. Lower margin percentages resulted from generally lower margins on Biosensor products, and lower sales. Selling, general and administrative expenses, not including bad debt writeoffs, were $250,443 for the quarter and $978,437 for the nine months ended March 31, 1999. These expenses were 43% and 50% of net sales compared to expenses of $262,088 and $809,664 or 43% and 50 % of net sales for the same periods last year. Allowance for doubtful accounts of $6,500 for the quarter and $173,136 in the nine months ended March 31, 1999 (of which approximately $130,000 resulted from the bankruptcy filing of Kontron Instruments Ltd., the Company's major distributor throughout Europe, see Note 10), added substantially to the total expenses for the nine months. During the comparable first nine months last year, $48,000 was written off for doubtful accounts. Research and development costs during the third quarter and first nine months of fiscal 1999 ended March 31, 1999 were 4.6% and 5.7% of sales compared to 7.1% and 7.3% respectively last year. This is a result of efforts to reduce expenses wherever possible in the current year. Net losses for the quarter and nine months ended March 31, 1999 were $34,262 and $482,997 respectively compared to losses (applicable to common shares) of $46,435 and $255,273 for the same periods last year. The substantially higher losses in the recent nine months period, despite higher sales, was primarily the result of unusually high bad debt writeoffs, and the Company's efforts to increase sales of all of its products. During the first nine months of fiscal 1999 ended March 31, 1999 accounts receivable increased to $437,024 (after the writeoff of receivables from Kontron Instruments, see Note 10) from $342,040 at June 30, 1998. This was due to the somewhat higher level of sales and slower payment by certain other customers. Inventory decreased from $322,706 at June 30, 1998 to $197,504 at March 31, 1999, Liquidity and Capital Resources Operating activities used cash of $110,571 during the nine months ended March 31, 1999. This compared to $177,514 used during the nine months ended March 31, 1998. The Company at June 30, 1998 and March 31, 1999 had deficits in net working capital (current assets minus current liabilities) of $530,131 and $1,025,918 respectively. Internally generated funds are not providing sufficient working capital to meet immediate needs, and the existing borrowing sources will not continue to be available. As of March 31, 1999, $250,281 was borrowed by the Company against its principle credit line. This credit agreement expired on December 31, 1998, and is secured by all of the assets of the Company. The Company was in violation of both the working capital and net book value covenants of the credit agreement. The lender waived the covenant violations through December 31, 1998 (see Note 7 herein), but has been unwilling to extend the waiver. During the quarter ended December 31, 1998 the Company borrowed additionally from its majority shareholder, (see Note 6 herein) and has been extended credit by its majority shareholder and a subsidiary of its majority shareholder to purchase finished goods. The Company has not been able to continue to receive loans or credit from its majority shareholder or subsidiaries thereof. The Company has not been successful in obtaining capital from unrelated sources. Internally generated funds, and present sources of funding have not been sufficient to meet working capital requirements, and without additional funding, the Company was not able to continue as a going concern. On March 23, 1999 Advanced Medical Products, Inc. filed a motion with the Federal Bankruptcy Court, District of South Carolina, for an order authorizing the sale of all assets, including equipment, inventory, and accounts receivable, outside the ordinary course of business, free and clear of all liens and encumbrances and other interests, pursuant to Chapter 11 paragraph 363 of the bankruptcy code. On May 11, 1999, pursuant to a court order entered on May 10, 1999 in the Federal Bankruptcy Court for the District of South Carolina, Advanced Medical Products, Inc. sold all assets, including equipment, inventory, and accounts receivable to Biosensor Corporation (See Notes 8. and 9. to the Financial Statements). No capital expenditures were made by the Company during the first nine months of this year or last year, and no capital expenditures are planned for the remainder of fiscal 1999. PART II - OTHER INFORMATION ITEM 6: Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K 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: /s/ GEORGE L. DOWN George L. Down, President Dated: June 28, 1999 EX-27 2
5 9-MOS JUN-30-1999 MAR-31-1999 28,822 0 461,618 (24,594) 197,504 679,521 1,114,287 (944,275) 891,584 1,715,439 0 0 0 59,625 0 891,584 1,945,509 1,945,509 1,095,028 1,095,028 0 0 71,017 (482,997) 0 (482,997) 0 0 0 (482,997) (.08) (.08)
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