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, 1997 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, 1997, there were 2,402,100 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,
1997 1997
CURRENT ASSETS
Cash and cash equivalents $ 258,651 $ 351,201
Receivables
Trade, less allowance for doubtful accounts
$7,500 and $7,000 respectively 479,653 412,919
Income taxes - 5,930
Inventories (Note 4) 563,466 478,711
Prepaid expenses 45,365 35,128
Total current assets 1,347,135 1,283,889
PROPERTY AND EQUIPMENT
Production equipment and tooling 60,140 60,140
Office equipment 200,062 194,552
260,202
254,692
Less accumulated depreciation 173,863 166,363
86,339
88,329
OTHER ASSETS, net 4,337 5,087
$ 1,437,811 $
1,377,305
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt $ 5,893 $
5,760
Accounts payable 104,325 122,443
Accrued expenses 93,399 87,794
Income taxes payable 21,070 -
Total current liabilities 224,687 215,997
LONG TERM DEBT, less current maturities 7,588 9,110
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 12,000,000 shares authorized,
issued 2,402,100 and 2,401,850 shares, respectively
24,021 24,018
Additional paid-in capital 646,971 646,880
Retained earnings 534,544 481,300
1,205,536
1,152,198
$ 1,437,811 $
1,377,305
GENETIC LABORATORIES WOUND CARE, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months
Ended
August 31,
1997
1996
Net revenues $ 839,900 $ 726,704
Cost of revenues 314,884 290,486
Gross profit 525,016 436,218
Operating expenses 443,957 400,072
Income from operations 81,059 36,146
Interest income, net 1,185 1,650
Income before taxes 82,244 37,796
Provision for taxes 29,000 9,500
Net income $ 53,244 $ 28,296
Per common share data
Net income $ .02 $ .01
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 2,436,758 2,473,989GENETIC
LABORATORIES WOUND CARE, INC.
STATEMENT OF CASH FLOWS
(unaudited)
Three months Ended
August 31,
1997
1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 53,244 $
28,296
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 8,250 3,416
Changes in current assets and liabilities
Receivables (60,804) (49,841)
Inventories (84,755) (87,633)
Prepaid expenses (10,237) 528
Accounts payable (18,118) 69,459
Accrued expenses 5,605 (13,831)
Income taxes payable 21,070 8,146
Net cash provided by (used in) operating activities (85,745)
(41,460)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (5,510) (2,155)
CASH FLOWS FROM FINANCIAL ACTIVITIES
Proceeds from issuance of common stock 94
- -
Principle payment on long term debt (1,389)
- -
Net cash used in financing activities (1,295) -
Net decrease in cash and cash equivalents (92,550) (43,615)
CASH and CASH EQUIVALENTS
Beginning 351,201 252,188
Ending $ 258,651 $
208,573GENETIC 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, 1997, and the results of its operations and its cash
flow for the three months ended August 31, 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, 1997.
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Revenues:
Net revenues were $839,900 for the three months ended August 31, 1997, compared
to $726,704 for the three months ended August 31, 1996, an increase of 15.6%.
Domestic sales increased 14.6% comparing the three months ended August 31,
1997, to the three months ended August 31, 1996. Sales to international
customers accounted for 17.0% of net revenues for the three months ended August
31, 1997, compared to 16.2% for the three months ended August 31, 1996. All
sales require payment in U.S. funds.
Sales of Suture Strip wound closure strips were up 3.7% comparing the three
months ended August 31, 1997, to the three months ended August 31, 1996. Wound
closure strips were $456,197, 54.3% of net revenues for the three months ended
August 31, 1997 compared to $440,065, 60.6% of net revenues for the three
months ended August 31, 1996.
Sales of specialty fasteners increased 46.4% comparing the three months ended
August 31, 1997, to the three months ended August 31, 1996. Specialty fasteners
were $297,826, 35.5% of net revenues for the three months ended August 31, 1997
compared to $203,456, 28.0% of net revenues for the three months ended August
31, 1996.
Cost of Revenues:
Cost of revenues were $314,884, 37.5% of net revenues, for the three months
ended August 31, 1997, compared to $290,486, 40.0% of net revenue for the three
months ended August 31, 1996. The decrease in cost of revenues percentage and
resulting increase in gross profit percentage was primarily due to increased
sales of the specialty fasteners which have a higher gross margin than the
Company's wound closure strips. The Company expects its costs of revenues to
continue to remain at the current level for the remainder of the fiscal year if
the sales mix continues as experienced during the three months ended August 31,
1997.
Operating Expenses:
Operating expenses were $443,957, 52.9% of net revenues, for the three months
ended August 31, 1997, compared to $400,072, 55.0% of net revenues, for the
three months ended August 31, 1996. The dollar increase is primarily due to
increased wages and benefits costs, and increased rent charges.
Liquidity and Capital Resources:
At August 31, 1997, the Company had working capital of $1,122,448 and a working
capital ratio of 6.0 to 1 compared to working capital of $1,067,892 and a
working capital ratio of 5.9 to 1 on May 31, 1997.
Cash and cash equivalents decreased by $92,550 from May 31, 1997 to August
31,1997. Operating activities utilized $85,745 as inventories increased by
$84,755 and receivables increased by $60,804.
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 August 31, 1997 and
May 31, 1997 were $0.
The Company expects that is will be able to fund its working capital
requirements for the remainder of the fiscal year through internally generated
funds, or utilize the line of credit if needed.
Major Customers:
For the three months ended August 31, 1997 no customers accounted for more than
ten percent of net revenues.
FOREIGN CURRENCY TRANSACTIONS
All of the Company's foreign transactions are negotiated, invoiced and paid in
U.S. dollars. Fluctuations in currency exchange rates in other countries may
therefore reduce the demand for the Company's products by increasing the price
of the Company's products in the currency of the countries in which the
products are sold.
FORWARD LOOKING STATEMENTS
In addition to historical information this report may contain forward-looking
statements that are subject to risks and uncertainties that may cause actual
results to differ materially from those reflected in the forward-looking
statements. The Company believes it has made fair and accurate forward-looking
statements by relying on past events and current information available. The
Company undertakes no obligations to revise these forward-looking statements to
reflect events that may arise.
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 13, 1997 By: /s/ Arthur A. Beisang
Arthur A. Beisang
Chief Executive Officer