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 March 31, 1998.
_____ 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 March 14,
1998.
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Advanced Medical Products Inc.
Balance Sheet
March 31, 1998 June 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 49,186 $ 50,938
Accounts Receivable (net of allowance for doubtful
Accounts of $29,360 and $30,954 respectively)
579,968 554,552
Inventory (Note 2) 540,818 512,812
Other Current Assets (Note 3) 128,007 57,168
Total Current Assets 1,297,979 1,175,470
Furniture and Equipment 204,246 282,384
Product Software Costs, Net 58,720 90,078
Other Assets Deposits 8,512 8,512
Total Assets 1,569,457 1,556,444
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities:
Notes Payable (Note 4 & 5) $ 402,615 $ 603,407
Accounts Payable 543,049 510,324
Current Portion Long-Term Debt (Note 6) 24,000 24,000
Accrued Wages and Commissions 97,912 89,949
Other Current Liabilities (Note 3) 233,172 254,961
Total Current Liabilities 1,300,748 1,482,641
Dividends Payable on Preferred Stock 148,015 61,860
Long-Term Liabilities:
Long-Term Debt, Net of Current
Portion (Note 4 & 6) 225,576 102,181
Total Liabilities 1,674,339 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 2,501,175 2,340,915
Accumulated Deficit (4,955,092) (4,771,688)
Stockholders Equity (104,883) (90,238)
Total Liabilities and Stockholders
Equity $ 1,569,457 $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
March 31, 1998 March 31, 1997
(unaudited) (unaudited)
Net Sales $ 616,092 $ 656,997
Cost of Sales 304,741 336,505
Gross Profit 311,351 320,492
Selling, General and Administrative 262,196 343,366
Research and Development 43,900 41,458
Interest Expenses 22,521 15,675
Income Before Income Taxes ( 17,266) ( 80,007)
Provision For Income Taxes -0- -0-
Net Income ( 17,266) ( 80,007)
Accumulated Deficit Beginning of Period $ (4,937,826) $ (4,382,487)
Accumulated Deficit End of Period $ (4,955,092) $ (4,462,494)
Net Income (Loss) Applicable to
Common Shares $ ( 46,979) $ ( 109,720)
Earnings Per Share Data:
Net Income (Loss) $ ( 0.01) $ ( 0.02)
Weighted Average Number of Common
Shares Outstanding 5,962,496 5,112,495
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, 1998 March 31, 1997
(unaudited) (unaudited)
Net Sales $ 1,645,896 $ 2,165,840
Cost of Sales 817,789 1,094,840
Gross Profit 828,107 1,071,000
Selling, General and Administrative 809,771 1,248,727
Research and Development 119,839 160,950
Interest Expenses 81,901 33,041
Income Before Income Taxes (183,404) (371,718)
Provision For Income Taxes -0- -0-
Net Income (183,404) (371,718)
Accumulated Deficit Beginning of Period $ (4,771,688) $ (4,090,776)
Accumulated Deficit End of Period $ (4,955,092) $ (4,462,494)
Net Income (Loss) Applicable to
Common Shares $ (272,542) (456,256)
Earnings Per Share Data:
Net Income (Loss) $ ( 0.05) $ (0.09)
Weighted Average Number of Common
Shares Outstanding 5,395,829 4,912,130
The accompanying notes are an integral part of these financial statements.
Advanced Medical Products Inc.
Statement of Cash Flows
Nine Months Ended
March 31, 1998 March. 31, 1997
(unaudited) (unaudited)
Cash flows from operating activities:
Net Income $ ( 183,405) $ ( 371,718)
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 111,253 93,491
Bad debt expense 47,139 -0-
Provision for doubtful accounts (1,595) 20,691
Change in assets and liabilities:
Accounts receivable ( 70,960) 123,204
Inventory ( 28,007) 18,775
Other assets ( 70,839) 57,644
Accounts payable 32,726 66,442
Other liabilities ( 13,826) ( 158,982)
Total adjustments 5,891 229,078
Net cash provided (used) by operating
activities ( 177,514) ( 142,640)
Cash flows used by investing activities:
Capital expenditures -0- ( 54,722)
Proceeds from sale of equipment -0- 1,500
Capitalization of software cost ( 1,756) ( 41,365)
Net cash used by investing activities ( 1,756) ( 94,587)
Cash flows provided (used) by financing activities:
Proceeds from loan from stockholder -0- 100,000
Net proceeds from sale of common stock 257,898 -0-
Net proceeds (payments) on short term debt ( 50,792) 220,552
Payments on long-term debt ( 29,588) ( 38,616)
Net cash provided (used) by financing
activities 177,518 281,936
Net increase (decrease) in cash ( 1,752) 44,709
Cash, beginning of period 50,938 14,631
Cash, end of period $ 49,186 $ 59,340
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 68,822 $ 33,041
Income taxes -0- -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
nine months period ended March 31, 1998 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 March 31, 1997 June 30, 1997
Inventory consisted of: (unaudited)
Raw materials and work in process $ 315,834 $ 305,188
Finished goods 224,984 207,624
$ 540,818 $ 512,812
3. Other Current Assets
Prepaid expenses $ 33,132 $ 41,041
Deposits current 4,962 4,962
Deferred taxes 9,914 9,914
Notes receivable 80,000 -0-
Advances -0- 1,250
$ 128,008 $ 57,168
Other Current Liabilities
Accrued royalties $ 23,729 $ 39,593
Accrued vacation pay 15,132 25,362
Deferred service contract revenue 163,628 125,200
Warranty reserve 15,645 26,489
Accrued sales tax liability 12,548 25,084
Other 2,500 -0-
$ 233,172 $ 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 March 31, 1998, $18,982 in
interest was due, in addition to the principle.
5. Short Term Debt
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 March 31, 1998, $ 383,633 was
borrowed by the Company under this agreement.
6. 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 March 31, 1998
was $ 43,576.
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 March 31,
1998.
7. 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.
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 $616,092 and $1,645,896 for the quarter and nine months
ended March 31, 1998 represent a 6% and 24% decrease from sales of
$656,997 and $2,165,840 in the comparable periods of 1997. These
decreases were due to lower sales to existing OEM/International
customers as well as to domestic customers.
Gross profit margins on sales were 50.5% of net sales for the
quarter and 50.3% for the nine months ended March 31, 1998. The
improvement from a gross margin of approximately 49% reported for
the first nine months of 1997 resulted from lower unabsorbed fixed
costs. Selling, general and administrative expenses of $262,088
for the quarter and $809,664 for the nine months ended March 31,
1998 were 42.5% and 49.2% of net sales compared to expenses of
$343,366 and $1,248,727 or 52.3% and 57.7 % of net sales for the
same periods last year. Total selling, general and administrative
expenses were approximately 24% lower than they were in the third
quarter and 35% lower than in the first nine months of fiscal 1997.
This is due to lower commissions and continuing efforts to cut and
control costs company-wide.
Research and development costs during the first nine months of
fiscal 1998 were reduced 25% from last year. This is a result of
efforts to decrease expenses company-wide.
Net losses for the quarter and nine months ended March 31, 1998 were
$17,059 and $183,198 respectively compared to losses of $80,007 and
$371,718 for the same periods last year. These substantially
reduced losses despite lower sales are a direct result of efforts to
reduce costs company-wide. Interest expenses of $22,942 for the
third quarter of 1998 and $81,901 for the first nine months of 1998
were up substantially from the $15,675 and $33,041 spent on interest
expense for the corresponding quarters last year. These higher
interest expenses are a direct result of higher borrowing levels
under the Company's credit line with Emergent Financial Group.
During the first nine months of fiscal 1998, accounts receivable
increased by $25,416 and inventory increased by $28,006. Accounts
payable increased by $22,725.
Liquidity and Capital Resources
Operating activities used $177,514 of cash during the nine months
ended March 31, 1998. This compared to $142,640 used during the
nine months of fiscal 1997. However, capital expenditures used only
$1,756 during the first nine months of fiscal 1998 compared to
$94,587 in capital expenditures during the first nine months of
1997.
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 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: