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 February 28, 1997COMMISSION 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 February 28, 1997, there were 2,401,600 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
February 28,
May 31,
1997 1996
CURRENT ASSETS
Cash and cash equivalents $ 249,262 $ 252,188
Trade receivables
less allowance for doubtful accounts of
$6,500 and $5,500, respectively 379,228 330,779
Inventories 505,908 631,734
Prepaid expenses 55,167 69,454
Total current assets 1,189,565 1,284,155
PROPERTY AND EQUIPMENT
Production equipment and tooling 60,140 59,093
Office equipment 186,015 148,021
246,155
207,114
Less accumulated depreciation 184,816 174,993
61,339
32,121
OTHER ASSETS, net 5,846 8,136
$ 1,256,750 $
1,324,412
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion long term debt $ 5,634 $
-
Accounts payable 30,192 215,764
Accrued expenses 86,252 69,519
Income taxes payable 1,646
- -
Total current liabilities 123,724 285,283
LONG TERM DEBT 10,606
- -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; issued 2,401,600 and
2,401,100 shares, respectively 24,016 24,011
Additional paid-in capital 646,788 646,605
Retained earnings 451,616 368,513
1,122,420
1,039,129
$ 1,256,750 $
1,324,412
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
February 28, February 28,
1997 1996 1997 1996
Net revenues $ 738,471 $ 600,260 $
2,188,772 $ 1,813,678
Cost of revenues 267,281 246,911
816,490 750,836
Gross profit 471,190 353,349
1,372,282 1,062,842
Operating expenses 417,090 338,294
1,248,072 1,025,471
Income from operations 54,100 15,055
124,210 37,371
Interest income(net) 972 2,874
3,892 8,373
Other income - -
- 164,213
Income before taxes 55,072 17,929
128,102 209,957
Provision for taxes 23,000 8,000
45,000 70,000
Net income $ 32,072 $ 9,929 $
83,102 $ 139,957
Per common share data
Net income $ .01 $ .00 $
.03 $ .05
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 2,495,639 2,550,050
2,497,930 2,550,050GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF CASH FLOWS
(unaudited)
Three months EndedNine Months Ended
February 28,
February 28,
1997 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 32,072 $ 9,929 $
83,102 $ 139,957
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,989 4,802
12,114 13,806
Changes in current assets and liabilities
Receivables 5,641 (42,600)
(48,449) (25,036)
Inventories 127,285 (8,328)
125,826 (24,563)
Prepaid expenses 11,122 13,512
14,287 (45,925)
Accounts payable (94,414) (72,403)
(185,572) (38,963)
Accrued expenses 2,773 8,938
16,733 (11,598)
Income taxes payable 1,000 (17,000)
1,646 15,446
Net cash provided by (used in) operating activities 90,468
(103,150) 19,687 23,124
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (15,662) (6,050)
(39,041) (7,970)
Net cash used in investing activities (15,662) (6,050)
(39,041) (7,970)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under long-term debt (1,326) -
(1,760) -
Proceeds from issuance of common stock 188 -
188 17,225
Proceeds from loan - -
18,000 -
Net cash provided by (used in) financing activities (1,138)
- - 16,428 17,225
Net increase (decrease) in cash and cash equivalents 73,668
(109,200) (2,926) 32,379
CASH and CASH EQUIVALENTS
Beginning 175,594 437,409
252,188 295,830
Ending $ 249,262 $ 328,209 $
249,262 $ 328,209
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 February 28, 1997, and the results of its operations and its
cash flow for the three months ended February 28, 1997 and 1996. 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 $738,471 for the three months ended February 28, 1997,
compared to $600,260 for the three months ended February 28, 1996, an increase
of 23%. Domestic sales increased 34% comparing the three months ended February
28, 1997, to the three months ended February 28, 1996. International sales
decreased by 12% comparing the three months ended February 28, 1997 to the
three months ended February 28, 1996. International sales accounted for 17% of
net revenues for the three months ended February 28, 1997 compared to 24% for
the three months ended February 28, 1996. All sales require payment in U.S.
funds.
Sales of Suture Strip wound closure strips were up 1% comparing the three
months ended February 28, 1997, to the three months ended February 28, 1996.
Wound closure strips accounted for 55% of net revenues for the three months
ended February 28, 1997 compared to 67% of net revenues for the three months
ended February 28, 1996.
Sales of specialty fasteners increased 100% comparing the three months ended
February 28, 1997, to the three months ended February 28, 1996. Specialty
fasteners accounted for 36% of net revenues for the three months ended February
28, 1997 compared to 22% of net revenues for the three months ended February
28, 1996.
Cost of Revenues:
Cost of revenues were $267,281, or 36.2% of net revenues, for the three months
ended February 28, 1997, compared to $246,911, or 41.1% of net revenues for the
three months ended February 28, 1996. 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 wound closure strips. The Company expects its cost of
revenues to continue to remain at the current level for the remainder of the
fiscal year.
Operating Expenses:
Operating expenses were $417,090, or 56% of net revenues, for the three months
ended February 28, 1997, compared to $338,294, or 56% of net revenues, for the
three months ended February 28, 1996. The dollar increase is primarily due to
increased product promotional activities directed at the Company's specialty
fastener products and associated personnel costs.
Other Income:
For the nine months ended February 28, 1996 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 February 28, 1997, the Company had working capital of $1,065,841 and a
working capital ratio of 9.6 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 increased by $73,668 from November 30, 1996 to
February 28,1997 as the Company lowered its inventory by $127,000 and decreased
its payables by $94,000, while recording net income of $32,000.
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 February 28, 1997 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 February 28, 1997 the outstanding balance
was $16,240.
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 February 28, 1997 one customer accounted for more
than ten percent of net revenues. This customer accounted for approximately 13%
of net revenues for the three months ended February 28, 1997.
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.
April 11, 1997 By: /s/ Arthur A. Beisang
Arthur A. Beisang
Chief Executive Officer