SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
/ X / ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-96882-LA
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CARING PRODUCTS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
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DELAWARE 98-0134875
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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PO BOX 9288, SEATTLE, WASHINGTON 98109
(principal mailing address)
(206) 523-7065
(Issuer's telephone number, including area code)
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Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
Warrants to purchase common stock.
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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-QSB. / X /
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 21, 2000: 3,056,343 shares of common stock, $.01 par
value (the "Common Stock").
Transitional Small Business Disclosure Format (check one):
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Certain exhibits Included in prior filings made
Listed in response to Item 13(a) under the Securities Act of 1933.
1
CARING PRODUCTS INTERNATIONAL, INC
FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 2000
INDEX PAGE NUMBER
PART I FINANCIAL INFORMATION
Financial Statements
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2000 and June 30, 2000 3
(unaudited for June 30, 2000 period)
Consolidated Statements of Operations for each of the three-month 4
periods ended June 30, 1999 and June 30, 2000
(unaudited)
Consolidated Statements of Cash Flows for the three-month 5
periods ended June 30, 1999 and June 30, 2000
(unaudited)
Notes to Consolidated Financial Statements 6
Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION 9
2
CARING PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30
MARCH 31 2000
2000 (UNAUDITED)
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Current Assets
Cash $ 181,763 $ 104,845
Accounts receivable less allowance
of $3,026 at March 31, 2000 and June 30, 2000 57,498 21,744
Inventories 15,715 11,101
Prepaid expenses 24,091 7,168
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Total current assets 279,067 144,858
Equipment, net 20,338 15,484
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$ 299,405 $ 160,342
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 107,945 $ 86,234
Accrued liabilities 24,621 15,156
Customer Sales Account Deposit - 32,339
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Total current liabilities 132,566 133,729
Stockholders' equity
Preferred stock, par value $0.01 per share; authorized,
1,000,000 shares; none outstanding - -
Common stock, par value $0.01 per share; authorized,
15,000,000 shares; issued and outstanding, 3,056,343
in March 31, 2000 and June 30, 2000, respectively 30,564 30,564
Additional paid-in capital 19,232,069 19,232,069
Accumulated deficit (19,095,794) (19,236,020)
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Total stockholders' equity 166,839 26,613
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$ 299,405 $ 160,342
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3
CARING PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
JUNE 30 JUNE 30
1999 2000
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Revenues $ 154,035 $ 36,250
Cost of sales 47,955 4,614
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Gross profit 106,080 31,636
Operating expenses
Selling 12,787 17,431
General and administrative 412,393 156,982
Amortization and depreciation 23,695 4,854
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Total operating expenses 448,875 179,267
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Loss from operations (342,795) (147,631)
Other income (expense)
Other income 11,664 7,405
Interest expense (741) -
Loss on sale of assets (84,176) -
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(73,253) 7,405
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Net loss $ (416,048) $ (140,226)
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Weighted average common shares outstanding 3,056,343 3,056,343
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Net loss per common share $ (0.14) $ (0.05)
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4
CARING PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
JUNE 30 JUNE 30
Increase (Decrease) in Cash 1999 2000
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Cash flows from operating activities
Net loss $ (416,048) $ (140,226)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization and depreciation 23,695 4,854
Issuance of restricted common stock to employees 55,000 -
Loss from disposal of equipment 84,176 -
Changes in operating assets and liabilities
Customer sales account deposit (174,694) 32,339
Accounts receivable 209,115 35,754
Inventories 225,139 4,614
Prepaid expenses - 16,923
Other assets (8,877) -
Accounts payable (77,190) (21,711)
Accrued liabilities (1,475) (9,465)
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Net cash used in operating activities (81,159) (76,918)
Cash flows from investing activities
Proceeds from sale of equipment 1,351 -
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Net cash provided by investing activities 1,351 -
Decrease in cash (79,808) (76,918)
Cash at beginning of period 707,847 181,763
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Cash at end of period $ 628,039 $ 104,845
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Supplemental cash flow information:
Cash paid for interest $ 741 $ -
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Noncash investing and financing activities:
Net book value of assets spun off to Creative Products $ 151,866 $ -
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5
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED JUNE 30, 1999 AND JUNE 30, 2000
NOTE 1 - FINANCIAL STATEMENTS
The unaudited consolidated financial statements and related notes are
presented as permitted by Form 10-QSB and do not contain certain
information included in the Company's audited consolidated financial
statements and notes for the fiscal year ended March 31, 2000. The
information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of the interim periods presented. The results
of operation for the interim periods are not necessarily indicative of the
results to be expected for the entire fiscal year ending March 31, 2001.
The accompanying unaudited consolidated financial statements and related
notes should be read in conjunction with the audited consolidated financial
statements and the Form 10-KSB of Caring Products International, Inc. and
its subsidiaries (the "Company") and notes thereto, for its fiscal year
ended March 31, 2000.
NOTE 2 - LOSS PER COMMON SHARE
The Company accounts for loss per common share under Statement of Financial
Accounting Standards No 128, "Earnings Per Share" which established
standards for computing and presenting earnings per share. Loss per share
is based on the weighted average number of common shares outstanding during
each period and income available to common stockholders. The weighted
average number of common shares was 3,056,343 for the three month periods
ended June 30, 1999 and June 30, 2000. The effect of common equivalent
shares on the computation of loss per share assuming dilution for the three
months ended June 30, 1999 and June 30, 2000 was anti-dilutive and
therefore is not included.
NOTE 3 - INVENTORIES
Inventories consisted of finished goods and are stated at the lower of
cost, as determined by the first-in, first-out method, or market (net
realizable value). At the end of Fiscal Year 2000, the Company wrote down
$166,153 of inventory to account for certain products that were held for
more than a 12 month period, products specifically packaged for a retail
chain or a specific market in which the Company's products are no longer in
active distribution, to reflect reduced sales activity from lack of
advertising and the expectation that the Company will have to sell such
inventory at substantial discounts or dispose through charitable donations
to hospitals or relief organizations. The Company closed one of its
fulfillment centers on or about June 30, 2000 and may close more during
Fiscal 2001 due to declining need for inventory storage and fulfillment
services.
NOTE 4 - POST PERIOD EVENT
On July 3, 2000, the Company signed a non-binding letter of intent to
merge with a digital imaging product company. The merger is subject to due
diligence, execution of definitive agreements and shareholder approval.
The agreement provides for the Company to issue approximately 30 million
shares of common stock as part of the proposed transaction upon closing.
NOTE 5 - GOING CONCERN
The Company incurred a net loss of $416,048 and $140,226 for the three
months ended June 30, 1999 and 2000, respectively. The Company's ability to
continue as a going concern is contingent upon its ability to maintain
positive cash flow from operating and financing activities. The Company
continues to review all its strategic options.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-QSB.
OVERVIEW
Caring Products International Inc and its subsidiaries (collectively the
"Company" or "CPI") has designed a line of proprietary urinary incontinence pant
and liner products which have been sold under the Rejoice trade name.
Historically, the Company's customer base has been retail drug stores, home
healthcare companies, surgical supply stores and national drug wholesale
companies. Given the high costs associated with increasing and maintaining
distribution for its incontinence products at larger retail drug chain stores,
increased competition, and executive management changes, in early 1999, the
Company announced its intent to evaluate all of its strategic options including
licensing the Company's products, merging with another company, potential
acquisitions, obtaining new sources of equity and cost-cutting measures. As
part of the Company's cost cutting measures, the Company ceased paid advertising
to consumers and participation in costly in-store chain promotions which are a
requirement to remain on the shelves of many large drug store chains in the US.
The Company further reduced its payroll and other administrative costs.
As part of the Company's restructuring efforts, on December 23, 1999, the
Company spun-off its wholly-owned subsidiary Creative Products International
Inc. to shareholders of record on June 30, 1999.
During the quarter ended June 30, 2000, the Company's sales continued to
decline. While the Company has significantly reduced expenditures in all
aspects of the Company's operations, it expects that it will continue to lose
money. The Company closed one if its product fulfillment centers and will
begin to close more of its fulfillment centers on or about June 30, 2000. The
Company is not under contractual obligation and may close any facility at any
time, without ongoing expense to the Company.
On July 3, 2000, the Company signed a non-binding letter of intent to merge
with a digital imaging products company. This merger is subject to final due
diligence, execution of definitive agreements and shareholder approval.
RESULTS OF OPERATIONS AND OPERATING EXPENSES
Revenues decreased from $154,035 in the 1999 Period to $36,250 in the 2000
Period, a 77% decrease. The decrease was a result of declining distribution of
Rejoice in drug stores, discontinued support of the brand in consumer
advertising, increased problems for long-term consumers to find a local source
of supply for the brand, and lack of available products sold in the quantities
and styles desired by national distributors of consumer healthcare products.
Cost of sales decreased from $47,955 for the 1999 Period to $4,614 in the 2000
Period, a decrease of 90%. This decrease is primarily attributable to
reductions in sales and sale of certain inventory which had been written down
during the Fiscal Year ended March 31, 2000. The Company did not add to its
inventory through new production during the period.
For the quarter ended 2000, the Company generated a gross profit of $31,636 as
compared to a gross profit of $106,080 in the June 30, 1999 Period, a 70%
reduction. This reduction in gross profit reflected the comparable decrease in
sales.
Total operating expenses decreased from $448,875 in the June 30 1999 Period to
$179,267 in the June 30, 2000 Period, a 60% decrease. This decrease reflects
the implementation of the Company's cost cutting programs which included
reductions in payroll, sales and advertising, product storage and distribution,
customer service and other administration associated with serving a national
consumer base which purchases products through chain drug stores to a smaller
consumer base which purchases products through direct mail, regional drug
stores and catalogs. Selling costs increased 36% from $12,787 in the 1999
Period to $17,431 in the 2000 Period due to the increasing cost of warehouse and
storage and shipping expenses and inability of the Company to negotiate
volume-oriented vendor discount agreements.
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General and administrative expenses decreased 62% from $412,393 in the 1999
Period to $156,982 in the 2000 Period. Accounting and legal fees continued to
be a significant portion of administration costs due to specific filing,
accounting and negotiation of the proposed merger. Depreciation and amortization
expense decreased from $23,695 in the 1999 Period to $4,854 in the 2000 Period,
an 80% decrease. The decrease is primarily attributable to the transfer of
assets to Creative Products International Inc which was subsequently spun-off to
shareholders as a separate operating company and reduction of value of certain
equipment.
Interest expense decreased from $741 in 1999 to $0 in 2000. This decrease was
attributable to the elimination of short-term obligations. Other income
generated was $7,405 in the 2000 Period compared to $11,664 in Fiscal 1999. This
decrease was attributable to reduction in cash balances in interest bearing
deposits.
As a result of the foregoing, the Company generated a loss of $416,048 for the
1999 Period as compared to a net loss of $140,226 for the 2000 Period, a 66%
reduction. For the three months ended June 30, 2000 the number of shares
outstanding remained at 3,056,343.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through the sale of equity
and debt. As of June 30, 2000, the Company did not generate new funding
through the sale of securities, exercise of stock options or warrants or new
debt to the Company.
As of June 30, 2000 the Company's principal sources of liquidity included cash
of $104,845, net accounts receivable of $21,744 after allowance for doubtful
accounts of $3,026 and inventory of $11,101. At the end of the Period, the
Company received a $32,339 deposit from a customer as payment for the shipment
of various incontinence products. This order was subsequently shipped in early
July. The cost of goods related to this order was approximately $1,200.
The Company's operating activities used cash of $76,918 in the 2000 Period and
$81,159 in the 1999 Period. The Company's future liquidity will be dependent
on the Company's ability to continue to sell its remaining inventory, reduce
expenses, close its warehouses as planned, collect its receivables, complete its
proposed merger on a timely basis, or obtain new sources of debt or equity.
There is no assurance that the Company will be able to generate the funds needed
to offset its current or future obligations on a timely basis.
FORWARD LOOKING STATEMENTS
This Form 10-QSB and other reports and statements filed by the Company from time
to time with the Securities and Exchange Commission (collectively the "Filings")
contain or may contain forward-looking statements and information that are based
upon beliefs of, and information currently available to, the Company's
management, as well as estimates and assumptions made by the Company's
management.
When used in the Filings, the words "anticipate", "believe", "estimate",
"expect", "future", "intend", "plan" and similar expressions, as they relate to
the Company or the Company's management, identify forward-looking statements.
Such statements reflect the current view of the Company with respect to future
events and are subject to risks, uncertainties and assumptions relating to the
Company's operations and results of operations, competitive factors and pricing
pressures, shifts in market demand, the performance and needs of the industries
which constitute the customers of the Company, the costs of product development
and other risks and uncertainties, including, in addition to any uncertainties
with respect to management of growth, increases in sales, the competitive
environment, hiring and retention of employees, pricing, new product
introductions, product productivity, distribution channels, enforcement of
intellectual property rights, possible volatility of stock price and general
industry growth and economic conditions. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
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PART I: FINANCIAL 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
27.1 -- Financial Data Schedule
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
Washington, on August 4, 2000.
CARING PRODUCTS INTERNATIONAL, INC.
By: /s/ Susan A. Schreter
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Susan A. Schreter
Acting Chairman of the Board and
CEO
In accordance with the requirements of the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
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/s/ Susan A. Schreter Acting Chairman and CEO August 4, 2000
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Susan A. Schreter
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