SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT of 1934
FOR QUARTER ENDED August 31, 1996 COMMISSION FILE NUMBER 0-16664
______________________________
GENETIC LABORATORIES WOUND CARE, INC.
State of Incorporation: Minnesota
I.R.S. Employer Identification No: 41-1604048
Executive Offices: 2726 Patton Road, St. Paul, MN 55113
Telephone Number: (612) 633-0805
______________________________
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 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_____
______________________________
On August 31, 1996, there were 2,401,100 shares of the Registrant's $.01 par
value common stock outstanding.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GENETIC LABORATORIES WOUND CARE, INC.
BALANCE SHEETS
(Unaudited)
ASSETS
August 31,
May 31,
1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 208,573 $ 252,188
Receivables
Trade, less allowance for doubtful accounts $5,500 380,620
330,779
Inventories 719,367 631,734
Prepaid expenses 68,926 69,454
Total current assets 1,377,486 1,284,155
PROPERTY AND EQUIPMENT
Production equipment and tooling 60,140 59,093
Office equipment 149,129 148,021
209,269 207,114
Less accumulated depreciation 177,643 174,993
31,626 32,121
OTHER ASSETS, net 7,371 8,136
$ 1,416,483 $ 1,324,412
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 285,223 $ 215,764
Accrued expenses 55,688 69,519
Income taxes payable 8,146 -
Total current liabilities 349,057 285,283
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; issued 2,401,100 24,011
24,011
Additional paid-in capital 646,605 646,605
Retained earnings 396,810 368,513
1,067,426 1,039,129
$ 1,416,483 $ 1,324,412
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months
Ended
August 31,
1996
1995
Net revenues $ 726,704 $ 646,156
Cost of revenues 290,486 269,028
Gross profit 436,218 377,128
Operating expenses 400,072 356,915
Income from operations 36,146 20,213
Interest income 1,650 2,361
Other income - 164,213
Income before taxes 37,796 186,787
Provision for taxes 9,500 61,000
Net income $ 28,296 $ 125,787
Per common share data
Net income $ .01 $ .05
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 2,473,989 2,577,350GENETIC
LABORATORIES WOUND CARE, INC.
STATEMENT OF CASH FLOWS
(unaudited)
Three months Ended
August 31,
1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28,296
$ 125,787
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,416
4,493
Changes in current assets and liabilities
Receivables (49,841)
(10,381)
Inventories (87,633)
84,409
Prepaid expenses 528
(37,136)
Accounts payable 69,459
39,207
Accrued expenses (13,831)
13,070
Income taxes payable 8,146
53,000
Net cash provided by (used in) operating activities (41,460)
272,449
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,155)
-
Net cash used in investing activities (2,155)
-
CASH FLOWS FROM FINANCIAL ACTIVITIES
Proceeds from issuance of common stock -
16,226
Net cash provided by financing activities -
16,226
Net increase (decrease) in cash and cash equivalents
(43,615) 288,675
CASH and CASH EQUIVALENTS
Beginning 252,188
295,830
Ending $ 208,573
$584,505GENETIC LABORATORIES WOUND CARE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Basis of Presentation
The interim financial statements are unaudited but in the opinion of
management, reflect all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position as of August 31, 1996, and the results of its operations and its cash
flow for the three months ended August 31, 1996 and 1995. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for the full year. These statements are condens
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Revenues:
Net revenues were $726,704 for the three months ended August 31, 1996, compared
to $646,156 for the three months ended August 31, 1995, an increase of 12.5%.
Domestic sales increased 20% comparing the three months ended August 31, 1996,
to the three months ended August 31, 1995. Sales to international customers
accounted for 16% of net revenues for the three months ended August 31, 1996,
compared to 21% for the three months ended August 31, 1995. All sales require
payment in U.S. funds.
Sales of Suture Strip wound closure strips were down 3% comparing the three
months ended August 31, 1996, to the three months ended August 31, 1995. Wound
closure strips accounted for 61% of net revenues for the three months ended
August 31, 1996 compared to 70% of net revenues for the three months ended
August 31, 1995.
Sales of specialty fasteners increased 82% comparing the three months ended
August 31, 1996, to the three months ended August 31, 1995. Specialty fasteners
accounted for 28% of net revenues for the three months ended August 31, 1996
compared to 17% of net revenues for the three months ended August 31, 1995.
Cost of Revenues:
Cost of revenues were $290,486, 40.0% of net revenues, for the three months
ended August 31, 1996, compared to $269,028, 41.6% of net revenue for the three
months ended August 31, 1995. The decrease in cost of revenues percentage and
resulting increase in gross profit percentage was primarily due to a decrease
in sales to international customers who receive lower pricing than domestic
customers.
Operating Expenses:
Operating expenses were $400,072, 55% of net revenues, for the three months
ended August 31, 1996, compared to $356,915, 55% of net revenues, for the three
months ended August 31, 1995. The increase is primarily due to increased
product promotional activities directed at the Company's specialty fastener
products.
Other Income:
For the three months ended August 31, 1995 other income included $164,213 for
the sale of the Company's rights, title, and interest in a royalty agreement
with Bio-Vascular, Inc. The royalty agreement was due to terminate in July 1995.
Liquidity and Capital Resources:
At August 31, 1996, the Company had working capital of $1,028,429 and a working
capital ratio of 3.9 to 1 compared to working capital of $998,872 and a working
capital ratio of 4.5 to 1 on May 31, 1996.
Cash and cash equivalents decreased by $43,615 from May 31, 1996 to August
31,1996. Receivables and inventory levels increased as a result of increased
sales activity, and payables increased due to increased inventory levels.
The Company has a revolving line of credit with a local bank in the amount of
$75,000. Outstanding balances on the line of credit at August 31, 1996 and May
31, 1996 were $0.
The Company expects that is will be able to fund its working capital
requirements for the year through internally generated funds, or utilize the
line of credit if needed.
Major Customers:
For the three months ended August 31, 1996 two customers accounted for more
than ten percent of net revenues. One customer accounted for approximately 12%,
while the other customer accounted for approximately 11% of net revenues for
the three months ended August 31, 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENETIC LABORATORIES WOUND CARE, INC.
October 11, 1996 By:____________________/s/_______________________
Arthur A. Beisang
Chief Executive Officer