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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-QSB
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended July 31, 2001
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1943 for the transition period from ___________ to ____________.
1-9087
(Commission file no.)
SUMMA RX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
<Table>
DELAWARE 75-1535372
(State or other jurisdiction of incorporation or organization) (IRS employer identification no.)
2940 FM 3028, Mineral Wells, Texas 76067
(Address of principal executive office) (Zip Code)
</Table>
(940) 325-0771
(Registrant's telephone number, including area code)
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 Act of 1934 during the
preceding 12 months (or for a 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 [ ]
As of July 31, 2001 there were 3,145,838 shares of common stock outstanding.
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SUMMA RX LABORATORIES, INC.
TABLE OF CONTENTS
FORM 10-QSB
<Table>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to the Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION 8
Item 1 - Legal Proceedings 8
Item 2 - Changes in Securities 8
Item 3 - Defaults Upon Senior Securities 8
Item 4 - Submission of Matters to a Vote of Security Holders 8
Item 5 - Other information 8
Item 6 - Exhibits and Reports on Form 8-K 8
SIGNATURES 8
</Table>
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SUMMA RX LABORATORIES, INC.
BALANCE SHEET
July 31, 2001
(Unaudited)
<Table>
ASSETS
Cash $ 649,324
Trade accounts receivable, less
allowance for doubtful accounts of $35,000 173,385
Inventory 113,424
Other current assets 172,504
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Total current assets 1,108,637
Property, plant and equipment 2,083,255
Less accumulated depreciation 887,223
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Net property, plant and equipment 1,196,032
Land 5,798
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Total assets $ 2,310,467
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 63,642
Accrued liabilities 99,996
Customer deposits 74,244
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Total current liabilities 237,882
Total liabilities 237,882
Common stock 31,458
Additional paid-in capital 3,219,379
Accumulated deficit (1,178,252)
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Shareholders' equity 2,072,585
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Total liabilities and shareholders' equity $ 2,310,467
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</Table>
See accompanying notes to the financial statements.
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SUMMA RX LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Three months ended
July 31
2001 2000
----------- -----------
Net sales $ 380,657 $ 794,806
Cost of goods sold 362,025 624,446
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Gross profit 18,632 170,360
Selling, general and administrative 126,275 185,178
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Operating loss (107,643) (14,818)
Other income (expense):
Interest income 5,966 24,399
Interest expense (42) (9,510)
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5,924 14,889
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Net earnings (loss) before taxes $ (101,719) $ 71
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Income taxes 34,340 --
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Net earnings (loss) $ (67,379) $ 71
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Basic and fully diluted earnings (loss) per share (.02) .00
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Weighted average shares outstanding 3,145,838 3,145,838
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</Table>
See accompanying notes to the financial statements.
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SUMMA RX LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Three months ended
July 31
2001 2000
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Cash flows from operating activities
Net earnings (loss) $ (67,379) $ 71
Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 29,325 28,016
Changes in operating assets and liabilities:
Trade accounts receivable 108,897 181,049
Inventory (26,480) 62,924
Other current assets (20,850) (60,730)
Accounts payable and accrued liabilities (18,006) (407,969)
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Net cash used by operating activities 5,507 (196,639)
Net decrease in cash 5,507 (196,639)
Cash at beginning of year 643,817 1,352,750
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Cash at end of year $ 649,324 $ 1,156,111
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</Table>
See accompanying notes to the financial statements.
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SUMMA RX LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND GENERAL
Summa Rx Laboratories, Inc. ("Summa") was formed as a Texas sole proprietorship
in 1972 and was incorporated in the State of Texas in October 1976, as Dews
Laboratories, Inc. In November 1987, Dews was merged into a Delaware corporation
and was renamed Summa Rx Laboratories, Inc.
Summa is engaged in the business of manufacturing and marketing of
pharmaceuticals, dietary supplements and nutritional products for sale under its
own label and under contract for others. Its executive offices and manufacturing
facilities are located at Mineral Wells, Texas 76067, approximately 45 miles
west of the Dallas/Fort Worth metropolitan area.
Note 2 - Basis of Presentation
The unaudited interim financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying unaudited interim financial statements and related notes should be
read in conjunction with the financial statements and notes thereto included in
the Summa's most recent Form 10-KSB covering fiscal year ended April 30, 2001.
The information furnished reflects, in the opinion of the management of Summa,
all adjustments necessary for a fair presentation of the financial results for
the interim period presented.
Note 3 - Earnings Per Share
The Company computes basic earnings (loss) per common share based on the
weighted average number of common shares outstanding. Diluted earnings per share
is computed based on the weighted average number of common shares outstanding
plus the number of additional common shares that would have been outstanding if
dilutive potential common shares had been issued. All potential common shares
were antidilutive in 2000 and 1999. Accordingly, singular earnings (loss) per
share amounts have been presented in the accompanying financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
On December 7, 1999 a former customer of Summa paid Summa the sum of $2,478,151
pursuant to the provisions of an Award of Arbitrator entered on November 1,
1999. The award is presented net of expenses of $548,130 and income taxes of
$443,591. Summa brought the action in arbitration seeking damages based upon the
customer's claim of termination of a manufacturing and sales agreement entered
into by it and Summa on July 11, 1997.
On December 27, 1999 Summa paid all of the principal and interest due under a
promissory note owed to Carol Petrie, a holder of 233,356 shares of Summa's
Common Stock.
In July 1999, the holders of the 12% Notes agreed to extend the due date of
those notes until July 10, 2001. On December 27, 1999 and January 15, 2000 Summa
called those notes and paid all of the principal and interest then due to the
holders of those notes.
In May 1998 Summa's issued its 10% Notes in the principal amount of $380,000. On
November 15, 2000, Summa called those notes and paid all of the principal and
interest then due to the holders of those notes. Summa has no long-term debt
outstanding and had approximately $644,000 cash in the bank or in interest
bearing accounts at April 30, 2001.
The contract manufacturing of dietary supplements is an industry of ever
changing products and is very price competitive. Summa's market share continues
to decrease and sales for the past fiscal year have been below breakeven levels.
Summa's sales for the first quarter of 2002 continue to drop and the outlook for
the balance of fiscal 2002 does not indicate a significant increase in sales.
Accordingly, positive earnings and cash flow from operations for fiscal year
2002 is not anticipated; however, the Company has sufficient funds on hand to
operate through 2002.
RESULTS OF OPERATIONS
Sales for the first quarter of fiscal year 2002 were approximately $381,000
compared to $795,000 in sales for the first quarter of fiscal year 2001. This
$414,000 reduction (52%) was primarily due to two of Summa's customers losing
their drug license in the spring of 2000. Customers have not yet been found to
fully replace the sales to these lost customers. Cost of sales as a percentage
of sales for the first quarter of fiscal year 2002 was higher (95% vs. 79%) than
the first quarter of fiscal year 2001 due primarily to fixed operating expenses
that are not based on sales.
Sales general and administrative expenses for the first quarter of fiscal year
2002 was approximately $126,600 compared to approximately $185,200 for the first
quarter of fiscal year 2001. This decrease of approximately $58,600 was due
primarily to lower commissions paid on lower sales and lower commission rates.
Interest income decreased approximately $18,400 while interest expense decreased
approximately $9,500. These changes are directly related to the arbitration
award of $2,478,151 which enabled Summa to pay off certain notes payable and
invest a significant portion in interest bearing accounts.
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PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings
Not applicable
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 - Other information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements 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.
Summa Rx Laboratories, Inc.
/s/ PAULINE G. LEE
September 6, 2001 -------------------------------
Pauline G. Lee
Pauline G. Lee
Chief Accounting Officer
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