-----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, Q+AC2oOReduzo+ZNi3GpE+O+eIIksc1X45k0aXACJaNgRcPGQbBIU+BK1FzMtaOU qu4/OOl76sbqS39Ti/CU7g== 0000950170-97-001524.txt : 19971205 0000950170-97-001524.hdr.sgml : 19971205 ACCESSION NUMBER: 0000950170-97-001524 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971204 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL TECHNOLOGY & INNOVATIONS INC /FL/ CENTRAL INDEX KEY: 0000847464 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 652954561 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 333-01950 FILM NUMBER: 97732579 BUSINESS ADDRESS: STREET 1: 3125 NOLT RD CITY: LANCASTER STATE: PA ZIP: 17631 BUSINESS PHONE: 7178926770 MAIL ADDRESS: STREET 1: 3125 NOLT RD CITY: LANCASTER STATE: PA ZIP: 17601 10QSB 1 =============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 SEPTEMBER 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934 For the transition period from____________________to___________________ COMMISSION FILE NUMBER: 33-27610-A MEDICAL TECHNOLOGY & INNOVATIONS, INC. (Exact name of small business issuer as specified in its charter) FLORIDA 65-2954561 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 17601 3125 NOLT ROAD, LANCASTER, PA (Zip Code) (Address of principal executive offices) (717) 892-6770 (Issuer's telephone number, including area code) Check whether the issuer (1) has 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 [ ] As of September 30, 1997 16,931,417 shares of Common Stock, no par value, of the registrant were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's annual report filed with the Securities and Exchange Commission on Form 10-KSB, filed December 2, 1997. ===============================================================================
MEDICAL TECHNOLOGY & INNOVATIONS, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets September 30, 1997 and June 30, 1997 3 Condensed Consolidated Income Statements For the Three Months ended September 30, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) 5 Condensed Consolidated Statements of Cash Flows For the Three Months ended September 30, 1997 and 1996 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis or Plan of Operation 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 13
2 PART I - FINANCIAL INFORMATION
MEDICAL TECHNOLOGY & INNOVATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30 AND JUNE 30, 1997 ASSETS September 30, June 30, (Unaudited) 1997 CURRENT ASSETS Cash and cash equivalents $ 15,329 $ 58,090 Accounts Receivable, less allowances of $36,367, respectively 453,693 407,633 Inventory 542,101 692,273 Prepaid Expenses 18,078 36,477 ----------- ----------- Total Current Assets 1,029,201 1,194,473 ----------- ----------- FIXED ASSETS Land 382,000 382,000 Equipment, less accumulated depreciation of $258,005 and $223,881, respectively 926,523 956,388 ----------- ----------- Fixed Assets, net 1,308,523 1,338,388 OTHER ASSETS Intangible and Other Assets 2,660,083 2,716,280 ----------- ----------- TOTAL ASSETS $ 4,997,807 $ 5,249,141 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 755,970 $ 418,341 Accrued Liabilities 307,697 384,995 Current Maturities of Long-Term Debt 760,052 732,997 ----------- ----------- Total Current Liabilities 1,823,719 1,536,333 LONG-TERM DEBT, NET OF CURRENT MATURITIES 941,936 1,020,040 ----------- ----------- TOTAL LIABILITIES 2,765,655 2,556,373 ----------- ----------- STOCKHOLDERS' EQUITY Common Stock, no par value, authorized 700,000,000 shares, outstanding 16,931,417 and 16,730,729 shares, respectively 6,789,147 6,755,260 Series A Convertible Preferred Stock, $100 par value, authorized 70,000 shares, outstanding 495 and 496 shares, respectively 4,398,923 4,407,810 Preferred Stock, authorized 100,000,000 shares $1,000 par value, 12%, noncumulative, Outstanding 22.5 shares 22,500 22,500 $100 par value, none issued Treasury Stock, at cost (309,742) (309,742) Accumulated Deficit (8,668,676) (8,183,060) ----------- ----------- Total Stockholders' Equity 2,232,152 2,692,768 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,997,807 $ 5,249,141 =========== ===========
The accompanying notes are an integral part of the condensed financial statements. 3
MEDICAL TECHNOLOGY & INNOVATIONS, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) 1997 1996 ---------- ---------- Revenues $ 984,624 $ 832,092 Cost of Goods Sold 742,071 617,347 ---------- ---------- Gross Profit 242,553 214,745 ---------- ---------- Operating Expenses Advertising 37,066 66,205 Selling, General and Administrative 641,695 779,060 ---------- ---------- Total Operating Expenses 678,761 845,265 ---------- ---------- Loss from Operations (436,208) (630,520) Interest expense, net 49,408 48,628 Net Loss $ (485,616) $ (679,148) ========== ========== Earnings (Loss) per common share Net Loss $ (.032) $ (.055)
The accompanying notes are an integral part of the condensed financial statements. 4
MEDICAL TECHNOLOGY & INNOVATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SERIES A CONVERTIBLE COMMON COMMON PREFERRED PREFERRED SHARES STOCK STOCK STOCK ------------ ----------- ----------- --------- BALANCE AT JUNE 30, 1995 11,205,036 $ 1,435,407 $ 56,000 Issuance of Common Stock 1,306,409 1,147,076 Exercise of Stock Options 735,084 1,102,427 Stock Issued for Services 217,520 462,230 Purchase of Treasury Shares (1,316,750) Net Loss ------------ ----------- ----------- --------- BALANCE AT JUNE 30, 1996 12,147,299 4,147,140 56,000 Sale of 70,000 Series A Convertible Preferred Stock, net of issuance costs $6,220,700 Conversions of Preferred Stock into Common Stock 3,697,576 1,846,390 (1,812,890) (33,500) Exercise of Stock Options 194,737 292,105 Issuance of Common Stock 532,898 270,250 Stock Issued for Services 215,000 199,375 Purchase of Treasury Shares (56,781) Net Loss ------------ ----------- ----------- --------- BALANCE AT JUNE 30, 1997 16,730,729 $ 6,755,260 $ 4,407,810 $ 22,500 Net Loss Issuance of Common Stock 144,509 25,000 Conversion of Preferred Stock into Common Stock 56,179 8,887 (8,887) ------------ ----------- ----------- --------- BALANCE AT SEPTEMBER 30, 1997 16,931,417 $ 6,789,147 $ 4,398,923 $ 22,520 ============ =========== =========== ========= TOTAL TREASURY ACCUMULATED STOCKHOLDERS' STOCK DEFICIT EQUITY ---------- ----------- ----------- BALANCE AT JUNE 30, 1995 $(2,781,730) $(1,290,323) Issuance of Common Stock 1,147,076 Exercise of Stock Options 1,102,427 Stock Issued for Services 462,230 Purchase of Treasury Shares $ (250,000) (250,000) Net Loss (1,893,771) (1,893,771) ---------- ----------- ----------- BALANCE AT JUNE 30, 1996 (250,000) (4,675,501) (722,361) Sale of 70,000 Series A Convertible Preferred Stock, net of issuance costs 6,220,700 Conversions of Preferred Stock into Common Stock 0 Exercise of Stock Options 292,105 Issuance of Common Stock 270,250 Stock Issued for Services 199,375 Purchase of Treasury Shares (59,742) (59,742) Net Loss (3,507,559) (3,507,559) ---------- ----------- ----------- BALANCE AT JUNE 30, 1997 $ (309,742) $(8,183,060) $ 2,692,768 Net Loss (485,616) (485,616) Issuance of Common Stock 25,000 Conversion of Preferred Stock into Common Stock 0 ---------- ----------- ----------- BALANCE AT SEPTEMBER 30, 1997 $ (309,742) $(8,668,676) $ 2,232,152 ========== =========== ===========
The accompanying notes are an integral part of the condensed financial statements. 5
MEDICAL TECHNOLOGY & INNOVATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (485,616) $ (679,148) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and Amortization 86,062 60,840 (Increase) in Accounts Receivable (46,060) (46,412) (Increase) Decrease in Inventory 150,172 (88,985) Decrease in Prepaid Expenses 18,399 21,169 (Decrease) Increase in Accounts Payable 337,629 (156,466) (Decrease) Increase in Accrued Liabilities (77,298) 139,516 Stock issued for services 0 112,500 ----------- ----------- Net cash used in operating activities (16,712) (636,986) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Net Assets of Steridyne 0 (4,474,565) Purchase of Fixed Assets 0 (64,311) ------------ ------------ Net cash used in investing activities 0 (4,538,876) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Series A preferred stock, net 0 6,220,700 Proceeds from issuance of stock, net 25,000 150,000 Proceeds from exercise of stock options, net 0 292,106 Acquisition of Treasury Stock 0 (18,367) Proceeds from exercise of Stock options, net - 0 - Repayment of notes payable (51,049) (564,644) ----------- ----------- Net cash from (used in) financing activities (26,049) 6,079,795 Net increase (decrease) in cash and cash equivalents (42,761) 903,933 Cash and cash equivalents at beginning of period 58,090 273,942 ----------- ----------- Cash and cash equivalents at end of period $ 15,329 $ 1,177,875 =========== ===========
The accompanying notes are an integral part of the condensed financial statements. 6 MEDICAL TECHNOLOGY & INNOVATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. CONDENSED FINANCIAL STATEMENTS. The unaudited condensed consolidated financial information contained in this report reflects all adjustments (consisting of normal recurring accruals) considered necessary, in the opinion of management, for a fair presentation of results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 1997 Annual Report on Form 10-KSB. The results of operations for periods ended September 30 are not necessarily indicative of operations for the full year. 2. STOCK OPTION PLANS. In October of 1995 officers of the Company were granted options to acquire up to 2.0 million shares of common stock at an exercise price of $1.50 per share. The options are exercisable ratably over a three year period commencing with the quarter ending June 30, 1996. In April of 1996 the Company's shareholders approved the 1996 Stock Option Plan, which allows the board of directors to grant up to 3.0 million options. During fiscal 1996, 1,250,000 options have been granted. The following is a summary of stock option transactions: Outstanding, July 1, 1997 3,239,936 Options granted 0 Options exercised 0 Options cancelled (500,000) ---------- Outstanding, September 30, 1997 2,739,936 ========== Exercisable, end of period 939,231 ========== 3. PREFERRED STOCK. The Company has two classes of preferred stock. The $1,000 par value convertible preferred stock is convertible into 14,985 shares of the Company's common stock. The Series A convertible preferred stock has no dividend, an 8% cumulative accretion, and may be redeemed as follows (per share): DATE OF REDEMPTION FOLLOWING ISSUANCE % OF STATED VALUE ------------------ ----------------- 12 - 18 months 130% 18 - 24 months 125% 24 - 30 months 120% 30 - 36 months 115% The Series A convertible preferred stock is convertible into approximately 30 million shares of the Company's common stock as of September 30, 1997. The Series A preferred stock conversion rate is lower of the approximate market rate or $2.72. As of September 30, 1997, 495 shares of the Series A preferred stock were 7 convertible. All Series A preferred shares outstanding as of July 1999 must be converted into the Company's common stock. In September of 1997, the Company renegotiated terms with the Series A Preferred Shareholders and as a result, all Series A Preferred Shares will be exchanged for a combination of cash, common stock, a new Series B Preferred stock and an amended warrant certificate with an exercise price of $1.00 per share in cash. The common stock is subject to a lock up for one year. The new Series B Preferred stock is redeemable by the Company at any time in cash at 110% of the face value or in common stock at 120% of the face value, with mandatory redemption required by September 30, 2000. Series B Preferred shares can be converted into common stock of the Company at a fixed conversion price of $1.00 per share in cash beginning October 1, 1998. 4. WARRANTS. The Company has issued warrants to purchase 4.3 million shares of common stock as of September 30, 1997. The warrants relate to grants made in connection with an equity issuance and various services rendered. The warrants can be exercised at prices ranging from $.25 to $2.72 per share. 3.1 million warrants expire in July 2001. Pursuant to terms renegotiated in September of 1997 between the Company and holders of Series A Preferred Shares issued in July of 1996, the exercise price of approximately 1.8 million warrants will be reduced from $2.72 to $1.00. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This analysis should be read in conjunction with the condensed consolidated financial statements, the notes thereto, and the financial statements and notes thereto included in the Company's June 30, 1997 Annual Report on Form 10-KSB. All nonhistorical information contained in this Form 10-QSB is a forward-looking statement. The forward looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward looking statements. Factors that might cause such differences include, but are not limited to the following, a slower acceptance of the MTI PhotoscreenerTM in the marketplace, increased foreign competition putting pricing pressures on Steridyne products, changes in economic trends and other unforeseen situations or developments. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. RESULTS OF OPERATIONS COMPARISON OF THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND 1996 Revenues for the first quarter of fiscal 1998 increased by $152,532 or an 18% increase. This increase results because of increased demand for the MTI PhotoScreener/Trademark/ and the inclusion of Steridyne in the consolidated results. Gross profit for the first quarter of fiscal 1998 increased by 13% versus the comparable quarter in fiscal 1997 mostly due to sales increases as overall margins are comparable between the two periods. MTI products generally have higher profit margins than Steridyne products. Operating expense decreased by 20% from $845,265 in the first quarter of fiscal 1997 to $678,761 in the 8 comparable quarter in fiscal 1998. This reduction is evident in most expense categories with the greatest savings in the employment and public relations areas. Exclusive of Steridyne, the number of full time employees has been cut back by over one-third from the first quarter of fiscal 1998 versus 1997. Management expects general and administrative costs to continue to reduce in the second quarter of fiscal 1998 because of extra costs the Company incurred in renegotiating the terms of the original Series A Preferred Stock issued in July of 1996. Management expects a lower net loss for the second fiscal quarter of 1998 because of increased sales and continued controls of costs. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997 the Company had cash of $15,329 and working capital of ($794,518) as compared to $58,090 and ($341,860) at June 30, 1997. The increase in the working capital deficit is partially due to the inclusion of $343,750 of subordinated convertible notes in the current liabilities. Assuming the subordinated notes are put to the Company for conversion, the Company intends to honor the put by issuing common stock. In September of 1997 the Company reached an agreement with the holders of the Series A Preferred shares issued in July of 1996 to amend certain term and conditions of the issue subject to the Company completing the required financing. All Series A Preferred shareholders were given the option of electing ("Option 1") a cash payment of $3,800 per share or ("Option 2") 10,000 shares of the Company's common stock and a new Series B Preferred share with a $6,000 face in exchange for 1 share of the original Series A Preferred. All Series A Preferred shareholders will also have the exercise price reduced on all warrants applicable to tendered Series A Preferred Shares from $2.72 to $1.00. The new Series B Preferred Stock is convertible into common stock of the Company from October 1, 1998 at a fixed price of $1.00. Conversion is limited to 10% of the holding for the first four months following October 1, 1998 then it is increased to 20% per month thereafter. The Series B Preferred stock can be redeemed by the Company at any time but is mandatory on September 30, 2000. Common stock issued to Series A Preferred Stockholders electing Option 2 is subject to a lock-up for next year or as follows: %SHARES DATE SALABLE ------------------ ------- December 1, 1997 2.5% January 1, 1998 5.0% February 1, 1998 7.5% April 1, 1998 10.0% July 1, 1998 30.0% October 1, 1998 45.0% ----- 100.0% As of October 1, 1997, shareholders owning 210 Series A Preferred shares elected Option 1 and shareholders owning 274 Series A Preferred shares elected Option 2. All funds required to satisfy the company's cash requirements of Option 1 were in place as of the same date. 9 In connection with securing financing for Option 1 of the Series A Preferred restructuring, the Company raised an additional $719,000 for general working capital purposes. The Company recruited new senior management who instituted significant reductions in employees, inventory management programs and cutbacks in operating expenses in all parts of the business. Management also broadened its sales and marketing emphasis to target large retailers and national public service organizations rather than individual healthcare professionals. Management believes these actions will improve operating performance and cash flow in the near term. For the past several years the Company has financed its operations primarily through private sales of securities and revenues from the sale of its products. Since June of 1993 the company has received net proceeds of approximately $10.0 million from the private sale of securities and debt. The Company may raise additional capital through private and/or public sales of securities in the future. 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: 3.1 Amendment to the Articles of Incorporation for SouthStar Productions, Inc., which changed its name to Medical Technology & Innovations, Inc. Incorporated by reference to the Company's Current Report on Form 8-K for an event on September 21, 1995] 3.2 Restated Articles of Incorporation for Medical Technology & Innovations, Inc.[Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-KSB (File No. 33-27610-A), filed September 30, 1996] 3.3 By-laws [Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S- 18 (File No. 33-27610-A), filed March 17, 1989] 10.1 Share Exchange Plan between SouthStar Productions, Inc. and Medical Technology, Inc. [Incorporated by reference to the Company's Current Report on Form 8-K for an event on August 21, 1995] 10.2 Asset purchase agreement for the purchase and sale of certain assets of Steridyne Corporation [Incorporated by reference to the Company's Current Report on Form 8-K for an event on July 31, 1996] 10.3 Medical Technology & Innovations, Inc. 1996 Stock Option Plan. [Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-KSB (File No. 33-27610-A), filed September 30, 1996] 10.4 SouthStar Productions, Inc. Stock Purchase Plan 1995a (Financial Public Relations Consulting Agreement) [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (File No. 33-27610-A), filed August 23, 1995] 10.5 Medical Technology & Innovations, Inc. Stock Compensation Plan [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (File No. 33-27610-A), Filed January 17, 1996] 11 10.6 Medical Technology & Innovations, Inc. 1996b Stock Purchase Plan (Consulting Agreement) [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (File No. 33-27610-A), filed April 22, 1996] 10.7 Form of Employment Agreement, Covenant not to Compete, and Stock Option Agreement between the Company and key employees. [Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-KSB (File No. 33-27610-A), filed September 30, 1996] 10.8 Purchase Agreement dated January 31, 1996 between the Company and Glenn and Ruth Schultz. [Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-KSB (File No. 33-27610-A), filed September 30, 1996] 16.1 Letter on change in certifying accountant [Incorporated by reference to the Company's Current Report on Form 8-K for an event on April 26, 1996] 27.1 Financial Data Schedules (b) Reports on Form 8-K. On July 31, 1996, the Company filed a current report on Form 8-K for an event of July 31, 1996, disclosing in item 2 thereof the acquisition of the net assets of Steridyne Corporation, k/n/a Sumacar, Inc. 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. AND BY: BY: /S/ JEREMY P. FEAKINS /s/ ROBERT D. BRENNAN - ------------------------------------------- ---------------------------- Jeremy P. Feakins, President and Chief Robert D. Brennan, President Executive Officer Chief Operating Officer Date: December 2, 1997. 13 EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 27.1 Financial Data Schedule EX-27.1 2 FDS
5 3-MOS JUN-30-1997 JUL-01-1997 SEP-30-1997 15,329 0 490,060 36,367 542,101 1,029,201 1,566,528 258,005 4,997,807 1,823,719 0 0 4,421,423 6,789,147 (309,742) 4,997,807 984,624 984,624 742,071 678,761 0 0 49,408 (485,616) 0 (485,616) 0 0 0 (485,616) (.032) 0
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