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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended March 31, 2001
Commission file number 000-27859
Rad Source Technologies, Inc.
(Name of Small Business Issuer in its charter)
Florida 65-0882844
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20283 State Road 7, Ste. 107, Boca Raton, Florida 33498
(Address of Principal Executive Offices)
(561) 482-9330
(Issuer's Telephone Number)
475 Ramblewood Dr., Ste. 207, Coral Springs, FL 33071
(Former Address of Principal Executive Offices)
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 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 [ ]
AS OF MAY 9, 2001 THE REGISTRANT HAD 2,545,040 SHARES OF COMMON STOCK, $.001 PAR
VALUE PER SHARE, OUTSTANDING.
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INDEX
PAGE
NUMBER
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Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - March 31, 2000 3
Consolidated Statements of Operations - Three Months
and Six Months Ended March 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 2001 and 2000 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 10
Signatures 11
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Rad Source Technologies, Inc. and Subsidiary
Consolidated Balance Sheet
March 31, 2001
(Unaudited)
Assets
Current assets:
Cash $ 116,538
Accounts receivable 14,683
Inventory 80,290
Prepaid expense 4,325
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Total current assets 215,836
Equipment, net 13,531
Other assets 6,211
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$ 235,578
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Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable $ 10,000
Accounts payable 133,432
Accrued expenses and other liabilities 165,983
Accounts payable - stockholders 180,856
Notes payable to stockholders 31,800
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Total current liabilities 522,071
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Stockholders' deficit
Common stock, par value $.001; 50,000,000
shares authorized; 2,545,040 issued and
outstanding 2,545
Additional paid-in capital 4,479,123
Accumulated deficit (4,768,161)
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Total stockholders' deficit (286,493)
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$ 235,578
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The accompanying notes are an integral part of these financial statements.
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Rad Source Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)
Three months ended Six months ended
March 31, March 31,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Sales $ 477,790 $ 159,575 $ 855,890 $ 248,575
Cost of sales 269,741 98,367 487,715 154,867
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Gross profit 208,049 61,208 368,175 93,708
---------- ---------- ---------- ----------
Expenses:
Research and development 33,191 36,235 41,358
Selling, general and administrative 186,959 81,234 348,820 171,984
---------- ---------- ---------- ----------
Total expenses 220,150 81,234 385,055 213,342
---------- ---------- ---------- ----------
Net loss (12,101) (20,026) (16,880) (119,634)
---------- ---------- ---------- ----------
Earnings per share - basic and diluted $ (0.00) $ (0.01) $ (0.01) $ (0.05)
========== ========== ========== ==========
Weighted average shares outstanding 2,545,040 2,410,040 2,511,290 2,410,040
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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Rad Source Technologies, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
March 31,
--------------------------
2001 2000
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Cash flow provided (used) by operating activities:
Net loss $(16,880) $(119,634)
Adjustments to reconcile net loss to net cash
provided (used) in operating activities 16,874 462
Change in operating assets and liabilities 29,942 96,558
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Net cash provided (used) by operating activities 29,936 (22,614)
Cash flows used by investing activities (15,718) --
Cash flows provided from financing activities 50,000 --
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Net increase (decrease) in cash 64,218 (22,614)
Cash, beginning of period 52,320 28,044
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Cash, end of period $116,538 $ 5,430
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Cash paid for interest $ -- $ --
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Income taxes paid during the year $ -- $ --
======== =========
The accompanying notes are an integral part of these financial statements.
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RAD SOURCE TECHNOLOGIES, INC. AND SUBSIDIARY
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying interim consolidated financial data are unaudited; however, in
the opinion of management, the interim data include all adjustments necessary
for a fair presentation of the results for interim periods. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
The results of operations for the three months and six months ended March 31,
2001 are not necessarily indicative of the results to be expected for the year
ended September 30, 2001.
The interim unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended September 30, 2000, filed as part of the Company's form 10-KSB.
NOTE 2 - UNCERTAINTY - GOING CONCERN
The Company's continued existence is dependent upon its ability to resolve its
liquidity problems, principally by obtaining equity, increasing sales and
achieving profitable operations. While undertaking the above, the Company must
continue to operate from cash flow generated by working capital and loans and
contributions from stockholders, none of which are assured. Although the
Company's losses are declining, falling from $119,634 in the prior comparative
six months ended March 31, 2000 to $16,880 in the current six month period ended
March 31, 2001, it has yet to generate a profit. In addition, the Company has a
stockholders deficit of $286,493. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
Management's plans in regard to this matter are to increase its marketing
efforts and sales of units in an effort to generate positive cash flow.
Additionally, the Company may seek to raise equity by converting existing debt,
and may continue to rely on vendors and service providers for periodic payment
deferrals and cost reductions to improve liquidity and sustain operations. The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
NOTE 3 - STOCK OPTIONS AND SALE OF STOCK
On November 6, 2000, the Company's board of directors approved the 2000 Stock
Option Plan (the "2000 Plan") and reserved 800,000 shares of the Company's
common stock for issuance. Also, as of December 1, 2000, the Company granted
170,000 stock
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options from the 2000 Plan to employees and consultants at an exercise price
equal to the closing price for the Company's common stock on December 1, 2000.
The stock options are exercisable for a period of three years from the date of
grant.
During November 2000, the Company sold 135,000 shares of restricted common stock
to an individual and his wife for $50,000. The individual is the president of
one of the Company's vendors.
NOTE 4 - COMMITMENTS
In February, the Company moved its offices to Boca Raton, FL. The Company has
entered into a one year lease and services commitment totaling $38,160, payable
monthly, ending in January 2002. The agreement includes the provision of office
space as well as certain support equipment and services including utilities,
telephone, high-speed internet, and reception.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's consolidated financial
condition and consolidated results of operations should be read in conjunction
with the financial statements and notes contained herein as well as the
Company's September 30, 2000 form 10-KSB.
Statements which are not historical facts, including statements about the
Company's confidence and strategies and its expectations about new and existing
products, technologies and opportunities, market and industry segment growth,
demand and acceptance of new and existing products are forward-looking
statements that involve risks and uncertainties. These include, but are not
limited to, product demand and market acceptance risks, the impact of
competitive products and pricing, the results of financing efforts, the effects
of economic conditions and trade, legal, social, and economic risks, such as
licensing and trade restrictions; and the results of the Company's business
plan. Such forward-looking statements are subject to risks and uncertainties.
Consequently, actual results could materially differ from those anticipated in
these forward-looking statements.
FINANCIAL CONDITION
The Company's net cash provided by operations in the six months ended March 31,
2001 was $29,936. Although inventories increased, this cash use was eclipsed by
receivables collections and customer order deposits. Cash flows used by
investing activities during the quarter consisted primarily of the purchase of
test equipment used to service the Company's products. Cash flows provided by
financing activities consist of the sale of 135,000 shares of the Company's
common stock for the sum of $50,000.
The Company's working capital consists of a deficit of $306,235 and a working
capital ratio of 0.41. This poor liquidity position is the result of the
Company's delay in its
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initial product introduction and commercial roll-out in fiscal 1999 that
resulted in its original undercapitalization. The Company's additions to
infrastructure to expand its capabilities in marketing, administration and
product offerings have contributed to operating losses, thereby negatively
affecting liquidity. In order to improve its financial condition, the Company
must become profitable, raise additional equity either directly or through the
conversion of existing debt, and must continue to rely on vendors, service
providers and management for periodic payment deferrals and/or cost reductions,
to improve liquidity and sustain its operations. Toward these ends, in the six
months ended March 31, 2001, the Company utilized stock options as a means of
non-cash compensation to both employees and consultants, has increased sales and
customer deposits on future deliveries, sold 135,000 restricted shares of stock
in November 2000 for the sum of $50,000, and has substantially reduced its net
loss to $16,880 from $119,634 in the prior comparative six months ended March
31, 2001. The Company has maintained positive relationships with its primary
vendors who continue to respond to the Company's production requirements.
Notwithstanding positive trends in revenues and cash flows, it should be noted
that there remains a high degree of risk and uncertainty with respect to the
Company's ability to continue its positive revenue and cash flow trends.
Over the next twelve months, the Company anticipates continued growth in
operations and therefore an increase in costs and operating expenses related to
payroll, additional sales efforts, and product development. Therefore,
management expects an ongoing need for capital over the next twelve months.
Regarding the Company's satisfaction of these cash requirements over the next
twelve months, management believes it will meet these only if the Company is
successful in maintaining its sales growth and positive cash flow trend, as well
as utilizing other actions (raising additional capital or deferring payments) to
maintain its operations. In the event the trends change and other methods which
have been previously utilized by the Company to maintain necessary liquidity for
operations are no longer available, the effect on the Company would be
significantly adverse.
RESULTS OF OPERATIONS
Second Quarter Ended March 31, 2001 Compared to Second Quarter Ended
March 31, 2000
Sales increased 199.4% to $477,790 primarily as the result of an increase in the
number of RS 3000 and RS 2000 units delivered over the prior comparative
quarter. The gross profit has increased by 240% as the result of increased sales
and the gross margin has increased from 38.4% to 43.5% as the result of an
increase in the sales price of the Company's products including the RS 3000
blood irradiator and the RS 2000 biological irradiator.
Research and Development costs are those incurred by the Company for materials
and external consultants. Research and Development costs incurred in the quarter
ended
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March 31, 2001 relate to upgrades and innovations for the Company's existing
products (which may also have other applications) as well as expansion into
non-irradiation applications of x-ray including imaging. As a result, in April
2001, the Company introduced its first imaging product, the RS 1000. The Company
continues to evaluate other products for development and therefore this expense
is subject to fluctuation, depending on managements' evaluation of potential
products and projects as well as capital availability.
Selling, general and administrative expenses grew 130% to $186,959 from $81,234.
This is the general result of increased unit sales and operations to support
growth. Sales Commissions account for approximately $26,000 of the increase and
personnel costs rose approximately $69,000 due to the addition of personnel and
salary increases. The remaining increase is attributable to general costs
required to support a larger operation.
Six Months Ended March 31, 2001 Compared to Six Months Ended March 31, 2000
Sales increased 244% to $855,890 primarily as the result of an increase in the
number of RS 3000 and RS 2000 units delivered over the prior comparative period.
Gross profit increased by 293% as the result of increased sales and the gross
margin has increased from 37.7% to 43.0% as the result of an increase in the
sales price of the Company's products including the RS 3000 blood irradiator and
the RS 2000 biological irradiator.
Research and Development costs incurred in the quarter ended March 31, 2001
relate to upgrades and innovations for the Company's existing products (which
may also have other applications) as well as expansion into imaging applications
of x-ray. As a result, in April 2001, the Company introduced its first imaging
product, the RS 1000 digital imager. In the prior comparative six months,
Research and Development costs related primarily to the original RS 3000 and RS
2000 products. The Company continues to evaluate other products for development
and, therefore, this expense is subject to fluctuation, depending on
managements' evaluation of potential products and projects as well as capital
availability.
Selling, general and administrative expenses grew 103% to $348,820 from
$171,984. This is the general result of increased unit sales and operations to
support growth. Sales Commissions account for approximately $38,000 of the
increase and personnel costs rose approximately $127,000 due to the addition of
personnel and salary increases. The remaining increase is attributable to
general costs required to support a larger operation.
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PART II. OTHER INFORMATION
ITEM 1. Not applicable.
ITEM 2.
During November 2000, the Company sold 135,000 shares of restricted common stock
to an individual and his wife for $50,000. The individual is the president of
one of the Company's vendors. Since the buyers are sophisticated investors and
had access to appropriate information concerning the Company, this sale is
exempt under Section 4(2) of the Securities Exchange Act of 1933.
ITEM 3 - 6 Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
March 31, 2001.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Rad Source Technologies, Inc.
Dated: May 11, 2001 By: /s/ Randol Kirk
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Randol Kirk, Chief Executive Officer
Dated: May 11, 2001 By: /s/ William Hartman
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William Hartman, Executive Vice President and
Chief Financial Officer
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