-----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, V0lgqwApj/szhMplvHZOgo0hiOKC98rIWtKAMaoey3xTiPQYYwRQl/2neUUcT/6R 9pXXlJ/Tv46MfvjEACOc/g== 0001014060-98-000017.txt : 19980525 0001014060-98-000017.hdr.sgml : 19980525 ACCESSION NUMBER: 0001014060-98-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980522 SROS: NASD 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: 98630227 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 QUARTERLY REPORT ON FORM 10-QSB 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 March 31, 1998 [ ] 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) 3125 Nolt Road, Lancaster, PA 17601 (Address of principal executive offices) (Zip Code) (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 March 31, 1998 25,907,344 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 March 31, 1998 and June 30, 1997 4 Condensed Consolidated Income Statements For the Three and Nine Months ended March 31, 1998 and 1997 (Unaudited) 5 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) 6 Condensed Consolidated Statements of Cash Flows For the Nine Months ended March 31, 1998 and 1997 (Unaudited) 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 9 Item 4. Submission of Matters to a Vote of Security Holders 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 14 2 PART I - FINANCIAL INFORMATION 3 Medical Technology & Innovations, Inc. Condensed Consolidated Balance Sheets March 31, 1998 and June 30, 1997 Assets March 31, 1998 June 30, (Unaudited) 1997 Current Assets Cash and cash equivalents $ 187, 474 $58,090 Accounts Receivable, less allowances of $36,367, respectively 596,496 407,633 Inventory 475,943 692,273 Prepaid Expenses 32,990 36,477 ------------- ----------- Total Current Assets 1,292,903 1,194,473 ------------- ----------- Fixed Assets Land 382,000 382,000 Equipment, less accumulated depreciation of $326,280 and $223,881, respectively 861,310 956,388 ------------- ----------- Fixed Assets, net 1,243,310 1,338,388 Other Assets Intangible and Other Assets 2,547,869 2,716,280 ------------- ----------- Total Assets $ 5,084,082 $ 5,249,141 ============= =========== Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $516,841 $418,341 Accrued Liabilities 473,350 384,995 Current Maturities of Long-Term Debt 1,039,480 732,997 ------------- ----------- Total Current Liabilities 2,029,671 1,536,333 Long-Term Debt, Net of Current Maturities 1,326,191 1,020,040 ------------- ----------- Total Liabilities 3,355,862 2,556,373 ------------- ----------- Stockholders' Equity Common Stock, no par value, authorized 700,000,000 shares, outstanding 25,907,344 and 16,730,729 shares, respectively 9,488,654 6,755,260 Series A Convertible Preferred Stock, $100 par value, authorized 70,000 shares, outstanding nil and 496 shares, respectively - 0 - 4,407,810 Series B Convertible Preferred Stock, $100 par value, authorized 1000 shares, 267 outstanding 1,602,000 - 0 - Preferred Stock, authorized 100,000,000 shares $1,000 par value, 12%, noncumulative, Outstanding 22.5 shares 22,500 22,500 Treasury Stock, at cost (309,742) (309,742) Accumulated Deficit (9,075,192) (8,183,060) ------------- ----------- Total Stockholders' Equity 1,728,220 2,692,768 ------------- ----------- Total Liabilities and Stockholders' Equity $ 5,084,082 $ 5,249,141 ============= ===========
The accompanying notes are an integral part of the condensed financial statements. 4 Medical Technology & Innovations, Inc. Condensed Consolidated Income Statements For the Three Months and Nine Months Ended March 31, 1998 and 1997 (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 1998 1997 1998 1997 Revenues $1,315,277 $931,193 $3,725,277 $2,778,230 Cost of Goods Sold 756,704 696,437 2,406,877 2,085,698 Gross Profit 558,573 234,756 1,318,400 692,532 Operating Expenses Advertising 30,652 95,085 101,398 399,731 Selling, General, and Administrative 678,592 977,694 1,932,462 2,667,155 Total Operating Expenses 709,244 1,072,779 2,033,860 3,066,886 (Loss) from Operations (150,671) (838,023) (715,460) (2,374,354) Interest expense, net 51,356 45,843 176,672 96,252 Net (Loss) from Operations ($202,027) ($883,866) ($892,132) ($2,470,606) Add: Gain on Restructuring of Series A Preferred Stock -0- - 0- 948,163 -0- Net Income (Loss) Attributable to Common Stock ($202,027) ($883,866) $56,031 ($883,866) Net Operating (Loss) per common share ($.01) ($.065) ($.044) ($.183) Net Income (Loss) per common share after Gain on Restructuring of Series A Preferred Stock ($.01) ($.065) $.003 ($.183)
Note: In accordance with Financial Accounting Standards No. 128, "Earnings per Share" the difference between basi earnings per share and diluted earnings per share is not material. The accompanying notes are an integral part of the condensed financial statements. 5 Medical Technology & Innovations, Inc. Condensed Consolidated Statements of Stockholders' Equity Series A Series B Convertible Convertible Total Common Common Preferred Preferred Preferred Treasury Accumulated Stockholders' Shares Stock Stock Stock Stock Stock Deficit Equity Balance at June 30, 1995 11,205,036 $1,435,407 $56,000 ($2,781,730) ($1,290,323) Issuance of Common Stock 1,306,409 1,147,076 1,147,076 Exercise of Stock Options 735,084 1,102,427 1,102,427 Stock Issued for Services 217,520 462,230 462,230 Purch of Treasury Shares (1,316,750) ($250,000) (250,000) Net Loss (1,893,771) (1,893,771) Balance at June 30, 1996 12,147,299 $4,147,140 56,000 ($250,000) ($4,675,501) ($722,361) Sale of 70,000 Series A Convertible Preferred Stock, Net of issuance costs $6,220,700 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 194,737 292,105 292,105 Issuance of Common Stock 532,898 270,250 270,250 Stock Issued for Services 215,000 199,375 199,375 Purchase of Treasury Shares (56,781) (59,742) (59,742) Net Loss (3,507,559) (3,507,559) Balance at June 30, 1997 16,730,729 $6,755,260 $4,407,810 $22,500 ($309,742) ($8,183,060) $2,692,768 Net Loss (892,132) (892,132) Issuance of Common Stock 169,509 50,000 50,000 Stock Issued for Services 790,344 197,584 197,584 Conversion of Series A Preferred Stock into common stock 8,216,772 1,581,747 (1,581,747) Gain on Restructuring of Series A Preferred Stock 904,063 (1,224,063) (320,000) Issuance of Series B Preferred In exchange for Series A (1,602,000) 1,602,000 Balance at March 31, 1998 25,907,344 $9,488,654 -0- $1,602,000 $22,520 ($309,742) ($9,075,192) $1,728,220
The accompanying notes are an integral part of the condensed financial statements. 6 Medical Technology & Innovations, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended March 31, 1998 and 1997 Nine Months Ended March 31, 1998 1997 Cash flows from operating activities: Net Loss ($892,132) ($2,470,606) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and Amortization 266,911 238,808 (Increase) Decrease in Accounts Receivable (188,863) 127,990 (Increase) Decrease in Inventory 216,330 (364,131) Decrease in Prepaid Expenses 3,487 103,003 Increase in Accounts Payable 98,500 300,707 Increase in Accrued Liabilities 88,355 93,861 Stock issued for services 197,584 199,375 Net cash used in operating activities (209,828) (1,770,993) Cash flows from investing activities: Purchase of Net Assets of Steridyne (4,406,635) Purchase of Fixed Assets (4,590) (240,275) Net cash used in investing activities (4,590) (4,646,910) Cash flows from financing activities: Costs incurred for restructuring of Series A Preferred Stock, net (320,000) -0- Proceeds from issuance of Series A preferred stock, net -0- 6,220,700 Proceeds from issuance of stock, net 50,000 220,250 Proceeds from exercise of stock options, net -0- 292,106 Acquisition of Treasury Stock -0- (57,357) Proceeds from issuance of notes payable 806,729 290,000 Repayment of notes payable, net (192,927) (649,648) Net cash from (used in) financing activities 343,802 6,316,051 Net increase (decrease) in cash and cash equivalents 129,384 (101,852) Cash and cash equivalents at beginning of period 58,090 273,942 Cash and cash equivalents at end of period $187,474 $172,090 ======== ========
The accompanying notes are an integral part of the condensed financial statements. 7 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 March 31 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 1997 and fiscal 1998, 1,250,000 and 500,000 options respectively, have been granted. In September of 1997 and February of 1998, the Board of Directors reduced the exercise price on all options granted to Company Executives to $.25. The following is a summary of stock option transactions: Outstanding, July 1, 1997 3,239,936 Options granted 500,000 Options exercised 0 Options cancelled (500,000) Outstanding, March 31, 1998 3,239,936 Exercisable, end of period 1,632,438 3. Preferred Stock. The Company has three 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 was convertible into approximately 30 million shares of 8 the Company's common stock as of September 30, 1997. The Series A preferred stock conversion rate was the lower of the approximate market rate or $2.72. During September of 1997, the Company renegotiated terms with the Series A Preferred Shareholders and as a result, all Series A Preferred Shares were 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. Series A Preferred shareholders owning 217 outstanding shares elected to receive $3,800 in cash in exchange for their Series A Preferred shares with a face value of $10,000. Series A Preferred shareholders owing 267 outstanding shares agreed to exchange their Series A Preferred shares for a new Series B Preferred share with a $100 par value, a face value of $6000 with accretion at 8% from October 1, 1997 plus 10,000 shares of the Company's common stock. The new Series B Preferred stock is convertible into common stock beginning October 1, 1998 at a fixed conversion price of $1.00 per share. Conversion is limited to 10% per month of the shares held until February 28, 1999 and 20% per month thereafter. The conversion feature doubles provided the Company's common stock closing bid price for ten consecutive days is greater than $2.00 per share. The Company has the option of redeeming the Series B Preferred shares at any time in cash, at 110% of the original face value of the Series B Preferred shares including accretion, or in the Company's common stock valued at the average closing bid price for the 30 days prior to the redemption at 120% of the original face value of the Series B Preferred shares including accretion. The Company is required to redeem the Series B Preferred stock on September 30, 2000. The common stock issued to Series B Preferred shareholders is subject to the following lockup schedule: Maximum Date Tradeable December 1, 1997 250 shares January 1, 1998 750 shares February 1, 1998 1,500 shares April 1, 1998 2,500 shares July 1, 1998 5,500 shares October 1, 1998 10,000 shares As a result of the restructuring of the Series A Preferred Stock, the common stock holders have received a gain of approximately $948,000. Warrants. The Company has issued warrants to purchase 3.6 million shares of common stock as of March 31, 1998. 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. 2.3 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. 9 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 Nine Month Periods Ended March 31, 1998 and 1997 Revenues for the first nine months of fiscal 1998 increased by $947,047 or a 34% increase. This increase results because of increased demand for the MTI PhotoScreener(TM) from retail optical chains, service clubs and schools combined with good growth in the core Steridyne business. Gross profit for the first half of fiscal 1998 increased by 90% versus the comparable period in fiscal 1997 mostly due to sales increases and mix as overall margins are comparable between the two periods. MTI products generally have higher profit margins than Steridyne products. Operating expense decreased by 33% from $3,066,886 in the first nine months of fiscal 1997 to $2,033,860 in the comparable period in fiscal 1998. This reduction is evident in almost all 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 half of fiscal 1998 versus 1997. Management expects ongoing general and administrative costs to reduce for the fourth quarter of fiscal 1998. Interest expense has increased 84% to $176,672 for the first nine months of fiscal 1998 versus 1997 because of the debt incurred to fund the restructuring of the Series A Preferred shares and higher interest costs associated with factoring the Company's receivables to increase cash flow. Management expects a lower net loss for the fourth fiscal quarter of 1998 because of increased sales, continued cost controls, and the consolidation of certain administrative and sales functions to the Company's Florida facility. Liquidity and Capital Resources At March 31, 1998 the Company had cash of $187,474 and working capital of ($736,768) 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 $363,000 of subordinated convertible notes and the refinancing of the Mortgage ($234,000) on the headquarters facility in Lancaster in current liabilities. Management is actively trying to sell or sublet the Lancaster building and relocate to a smaller leased facility in the same area. Assuming the subordinated notes are put to the Company for conversion, the Company intends to honor the put by issuing common stock. 10 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 which ends on October 1, 1998 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. Item 4. Submisssion of Matters to a Vote of Security Holders At the Company's 1998 annual meeting of the stockholders held on February 23, 1998, Robert Brennan was elected as a director of the Company for a three year term by a vote of 17,813,523 in favor, 293 votes against and 3,999 abstain votes. Further, Simon Lever & Company was ratified as the Company's independent certified public accountant for the 1998 fiscal year by a vote of 17,397,433 in favor, 1953 votes against and 418,429 abstain votes. 11 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] 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 12 21.0 Subsidiaries of the Company. Medical Technology, Inc., an Iowa corporation Steridyne Corporation, a Florida corporation 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. 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. AND BY: BY: /s/ Dennis A. Surovcik /s/ ROBERT D. BRENNAN Dennis A. Surovcik, Senior Vice President Robert D. Brennan, President Chief Financial Officer Chief Operating Officer Date: May 15, 1998 14 EX-27 2 FDS --
5 This schedule contains financial information extracted from the unaudited financial statements of Medical Technology & Innovations, Inc. for March 31, 1998 and 1997, and is qualified in its entirety by reference to such financial atatements. 0000847464 Medical Technologies & Innovations, Inc. 1 US Dollars 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 1 187,474 0 632,863 36,367 475,943 1,292,903 1,569,590 326,280 5,084,082 2,029,671 0 1,602,000 22,500 9,488,654 (9,384,934) 1,728,220 3,725,277 3,725,277 2,406,877 2,033,860 0 0 176,672 56,031 0 (892,132) 0 948,163 0 56,031 .003 .003
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