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 November 30, 1996COMMISSION 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 November 30, 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
November 30, May 31,
1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 175,594 $ 252,188
Receivables
Trade, less allowance for doubtful accounts of
$6500 and $5500, respectively
384,869 330,779
Inventories 633,193 631,734
Prepaid expenses 66,289 69,454
Total current assets 1,259,945 1,284,155
PROPERTY AND EQUIPMENT
Production equipment and tooling 60,140 59,093
Office equipment 170,353 148,021
230,493
207,114
Less accumulated depreciation 180,590 174,993
49,903
32,121
OTHER ASSETS, net 6,609 8,136
$ 1,316,457 $
1,324,412
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion long term debt $ 5,506 $
-
Accounts payable 124,606 215,764
Accrued expenses 83,479 69,519
Income taxes payable 646
- -
Total current liabilities 214,237 285,283
LONG TERM DEBT 12,060
- -
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 419,544 368,513
1,090,160
1,039,129
$ 1,316,457 $
1,324,412
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
1996 1995 1996
1995
Net revenues $ 723,597 $ 567,262 $
1,450,301 $ 1,213,418
Cost of revenues 258,723 234,897
549,209 503,925
Gross profit 464,874 332,365
901,092 709,493
Operating expenses 430,910 330,262
830,982 687,177
Income from operations 33,964 2,103
70,110 22,316
Interest income(net) 1,270 3,138
2,920 5,499
Other income - -
- 164,213
Income before taxes 35,234 5,241
73,030 192,028
Provision for taxes 12,500 1,000
22,000 62,000
Net income $ 22,734 $ 4,241 $
51,030 $ 130,028
Per common share data
Net income $ .01 $ .00 $
.02 $ .05
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 2,502,831 2,583,050
2,498,980 2,580,200
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF CASH FLOWS
(unaudited)
Three months Ended
Six Months Ended
November 30,
November 30,
1996 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 22,734 $ 4,241 $
51,030 $ 130,028
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,709 4,511
7,125 9,004
Changes in current assets and liabilities
Receivables (4,249) 27,954
(54,090) 17,564
Inventories 86,174 (100,644)
(1,459) (16,235)
Prepaid expenses 2,637 (22,301)
3,165 (59,437)
Accounts payable (160,617) (5,767)
(91,158) 33,440
Accrued expenses 27,791 (33,606)
13,960 (20,536)
Income taxes payable (7,500) (20,554)
646 32,446
Net cash provided by (used in) operating activities (29,321)
(146,175) (70,781) 126,274
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,224) (1,920)
(23,379) (1,920)
Net cash used in investing activities (21,224) (1,920)
(23,379) (1,920)
CASH FLOWS FROM FINANCIAL ACTIVITIES
Principal payments under long-term debt (434) -
(434) -
Proceeds from issuance of common stock - 999
- 17,225
Proceed from loan 18,000 -
18,000 -
Net cash provided by financing activities 17,566 999
17,566 17,225
Net increase (decrease) in cash and cash equivalents (32,979)
(147,096) (76,594) 141,579
CASH and CASH EQUIVALENTS
Beginning 208,573 584,505
252,188 295,830
Ending $ 175,594 $ 437,409 $
175,594 $ 437,409
GENETIC 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 November 30, 1996, and the results of its operations and its
cash flow for the three months
ended November 30, 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 condensed and therefore do
not include all of the information and footnotes required by generally accepted
accounting principles for
complete financial statements. These financial statements should be read in
conjunction with the financial
statements and notes thereto contained in the Company's Form 10-KSB or Annual
Report for the year ended
May 31, 1996.
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Revenues:
Net revenues were $723,597 for the three months ended November 30, 1996,
compared to $567,262 for the
three months ended November 30, 1995, an increase of 27.5%. Domestic sales
increased 31% comparing the
three months ended November 30, 1996, to the three months ended November 30,
1995. Sales to
international customers accounted for 12.5% of net revenues for the three
months ended November 30,
1996, compared to 15% for the three months ended November 30, 1995. All sales
require payment in U.S.
funds.
Sales of Suture Strip wound closure strips were up 6% comparing the three
months ended November 30,
1996, to the three months ended November 30, 1995. Wound closure strips
accounted for 56% of net
revenues for the three months ended November 30, 1996 compared to 68% of net
revenues for the three
months ended November 30, 1995.
Sales of specialty fasteners increased 117% comparing the three months ended
November 30, 1996, to the
three months ended November 30, 1995. Specialty fasteners accounted for 33% of
net revenues for the three
months ended November 30, 1996 compared to 20% of net revenues for the three
months ended November
30, 1995.
Cost of Revenues:
Cost of revenues were $258,723, or 35.8% of net revenues, for the three months
ended November 30, 1996,
compared to $234,897, or 41.4% of net revenue for the three months ended
November 30, 1995. The
decrease in the cost of revenues percentage and the resulting increase in the
gross profit percentage was
primarily due to a decrease in product costs of the wound closure strips and an
increase in sales of the
specialty fasteners that have a higher gross margin than the Company's other
products. The Company expects
its cost of revenues to remain at the current percentage of net sales
throughout the remainder of the fiscal
year.
Operating Expenses:
Operating expenses were $430,910, or 60% of net revenues, for the three months
ended November 30, 1996,
compared to $330,262, or 58% of net revenues, for the three months ended
November 30, 1995. The increase
is primarily due to increased product promotional activities directed at the
Company's specialty fastener
products and increased personnel costs.
Other Income:
For the six months ended November 30, 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.
Liquidity and Capital Resources:
At November 30, 1996, the Company had working capital of $1,045,708 and a
working capital ratio of 5.9 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 $32,979 from August 31, 1996 to November
30,1996 as the Company
lowered its payables by $160,000 and decreased its inventory by $86,000.
The Company has a revolving line of credit with a local bank in the amount of
$200,000. Outstanding
balances on the line of credit at November 30, 1996 and May 31, 1996 were $0.
On October 28, 1996, the Company borrowed $18,000 from a local bank for the
purchase of a new phone
system. The loan is for three years at 9.0% interest with monthly payments of
$573.43. On November 30, 1996
the outstanding balance was $17,566.
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 November 30, 1996 one customer accounted for more
than ten percent of net
revenues. This customer accounted for approximately 13% for the three months
ended November 30, 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.
January 13, 1997 By: /s/ Arthur A. Beisang
Arthur A. Beisang
Chief Executive Officer