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 September 30, 2000
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 33-96882-LA
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CARING PRODUCTS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
____________________
DELAWARE 98-0134875
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization) ____________________
PO BOX 9288, SEATTLE, WASHINGTON 98109
(principal mailing address)
(206) 523-7065
(Issuer's telephone number, including area code)
____________________
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 2(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
-
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 November 3, 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 SEPTEMBER 30, 2000
INDEX PAGE NUMBER
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2000 and September 30, 2000 3
(unaudited for September 30, 2000 period)
Consolidated Statements of Operations for the three and six-month
periods ended September 30, 1999 and September 30, 2000 4
(unaudited)
Consolidated Statements of Cash Flows for the six-month
periods ended September 30, 1999 and September 30, 2000 5
(unaudited)
Notes to Unaudited 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
SEPTEMBER 30,
MARCH 31, 2000
2000 (UNAUDITED)
--------------- -------------
Current Assets
Cash $ 181,763 $ 13,238
Accounts receivable less allowance
of $3,026 at March 31, 2000 and September 30, 2000 57,498 8,254
Inventories 15,715 6,380
Prepaid expenses 24,091 4,096
--------------- -------------
Total current assets 279,067 31,968
Equipment, net 20,338 15,484
--------------- -------------
$ 299,405 $ 47,452
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 107,945 $ 82,163
Accrued salaries 9,465 12,499
Accrued liabilities 15,156 -
--------------- -------------
Total current liabilities 132,566 94,662
Stockholders' equity (deficit)
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 September 30, 2000, respectively 30,564 30,564
Additional paid-in capital 19,232,069 19,232,069
Accumulated deficit (19,095,794) (19,309,843)
--------------- -------------
Total stockholders' equity (deficit) 166,839 (47,210)
--------------- -------------
$ 299,405 $ 47,452
=============== =============
See accompanying notes to consolidated financial statements
3
CARING PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30,
1999 AND 2000
(UNAUDITED)
THREE MONTH PERIODS SIX MONTH PERIODS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
Revenues $ 130,081 $ 48,150 $ 284,116 $ 84,400
Cost of sales 68,272 4,721 116,227 9,335
----------- ----------- ----------- -----------
Gross profit 61,809 43,429 167,889 75,065
Operating expenses
Selling 49,567 22,765 117,187 40,196
General and administrative 115,370 113,176 476,264 270,158
Amortization and depreciation 9,428 - 33,123 4,854
----------- ----------- ----------- -----------
Total operating expenses 174,365 135,941 626,574 315,208
----------- ----------- ----------- -----------
Loss from operations (112,556) (92,512) (458,685) (240,143)
Other income (expense)
Other income 189,426 18,689 204,424 26,094
Interest expense - - (741) -
Loss on sale of assets - - (84,176) -
----------- ----------- ----------- -----------
189,426 18,689 119,507 26,094
----------- ----------- ----------- -----------
Net loss $ 76,870 $ (73,823) $ (339,178) $ (214,049)
----------- ----------- ----------- -----------
Weighted average common shares 3,056,343 3,056,343 3,056,343 3,056,343
=========== =========== =========== ===========
outstanding
Net loss per common share, $ 0.03 $ (0.02) $ (0.11) $ (0.07)
=========== =========== =========== ===========
primary and dilutive
See accompanying notes to consolidated financial statements
4
CARING PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
Increase (Decrease) in Cash 1999 2000
--------------- ---------------
Cash flows from operating activities
Net loss $ (339,178) $ (214,049)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Amortization and depreciation 33,123 4,854
Issuance of restricted common stock to employees 55,000 -
Loss from disposal of equipment 84,176 -
Discounted accounts payable (37,630) -
Changes in operating assets and liabilities
Customer sales account deposit (183,981) -
Accounts receivable 278,942 49,244
Inventories 293,411 9,335
Prepaid expenses - 19,995
Other assets 12,198 -
Accounts payable (136,052) (25,782)
Accrued liabilities (2,936) (12,122)
--------------- ---------------
Net cash provided by (used in) operating activities 57,073 (168,525)
Cash flows from investing activities
Proceeds from sale of equipment 1,351 -
--------------- ---------------
Net cash provided by investing activities 1,351 -
Decrease in cash 58,424 (168,525)
Cash at beginning of period 707,847 181,763
--------------- ---------------
Cash at end of period $ 766,271 $ 13,238
=============== ===============
Supplemental cash flow information:
Cash paid for interest $ 741 $ -
=============== ===============
Noncash investing and financing activities:
Net book value of assets spun off to Creative Products $ 151,866 $ -
=============== ===============
See accompanying notes to consolidated financial statements
5
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 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 and six-month
periods ended September 30, 1999 and September 30, 2000. The effect of
common equivalent shares on the computation of loss per share assuming
dilution for the six months ended September 30, 1999 and September 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 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.
NOTE 4 - AGREEMENT TO MERGE
During July 2000, the Company signed a non-binding letter of intent to
merge with a digital imaging product company. The agreement provides for
the Company to issue approximately 30 million shares of common stock as
part of the proposed transaction upon closing. During September 2000, the
Company announced that the proposed merger has been delayed due to a
dissident minority shareholder and the failure of both companies to sign a
definitive agreement to merge. The Company continues to negotiate with the
principals of the digital imaging company as well as explore other
transactions and business opportunities.
NOTE 5 - GOING CONCERN
The Company incurred a net loss of $339,178 and $214,049 for the six months
ended September 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.
6
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 period ended September 30, 2000, the Company's sales continued to
decline and the Company expects that it will continue to lose money due to the
administrative costs of maintaining a public company and winding down its
inventories. The Company closed one if its product fulfillment centers and will
continue to close more of its fulfillment centers during Fiscal 2001. The
Company is not under contractual obligation and may close any facility at any
time.
RESULTS OF OPERATIONS AND OPERATING EXPENSES
Revenues decreased from $130,081 in the three-month period ended September 30,
1999 to $48,150 in the comparable 2000 Period, a 63% decrease. Revenues for the
six-month 1999 Period was $284,116, compared to $84,400 in the 2000 Period, a
70% 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 consumer healthcare products.
Cost of sales decreased from $68,272 for the 1999 three month Period to $4,721
in the 2000 Period, a decrease of 93%. Cost of sales in the six month 1999
period were $116,227, compared to $9,335 in the 2000 period, a 92% decrease.
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 three month period ended 2000, the Company generated a gross profit of
$43,429 as compared to a gross profit of $61,809 in the September 30, 1999
Period, a 30% reduction. The gross profit for the six-month period ended 1999
was $167,889, and $75,065 in the 2000 period, a 55% decrease. This reduction in
gross profit reflected the comparable decrease in sales activity.
Total operating expenses decreased from $174,365 in the three month September
1999 Period to $135,941 in the three month September 30, 2000 Period, a 22%
decrease. The operating expenses in the six-month 1999 period were $626,574 and
$315,208 in the 2000 period, a 50% 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.
7
Selling costs decreased 54% from $49,567 in the three month 1999 Period to
$22,765 in the 2000 Period due to the reductions in sales and shipping expenses.
The selling costs in the six-month 1999 period decreased from $117,187 to
$40,196 in the 2000 Period, a 66% decrease.
General and administrative expenses decreased 2% from $115,370 in the three
month 1999 Period to $113,176 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. The general and
administrative expenses in the six-month 1999 period were $476,264 and $270,158
in the 2000 period, a 43% decrease. These expenses were primarily attributable
to the costs of maintaining a public company and closing down its operations.
Depreciation and amortization expense were $9,428 in the three month 1999
Period and $0 in the 2000 Period. For the six-month 1999 period, the
depreciation and amortization was $33,123 and $4,854 in the 2000 period, an 85%
decrease. The decrease was attributable to the transfer of assets to Creative
Products International Inc. which was subsequently spun-off to shareholders as a
separate operating company and the write off of certain equipment.
The interest expense decreased from $741 in the six month 1999 period to $0 in
2000. This decrease was attributable to the elimination of short-term
obligations. Other income of $18,689 in the three month 2000 Period was
attributable to the write off of office equipment lease obligations, a 90%
decrease compared to $189,426 in the three month 1999 period which was generated
through the sale of goods and collection of receivables written off in prior
periods.
As a result of the foregoing, the Company generated a loss of $73,823 in the
three month 2000 Period as compared to a net profit of $76,870 in the 1999
period. The net loss in the six-month 1999 period was $339,178, compared to a
net loss of $214,049 in the six month 2000 period.
For the three and six months ended September 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 September 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 but maintained its operations through sales of remaining
inventory.
As of September 30, 2000 the Company's principal sources of liquidity included
cash of $13,238, net accounts receivable of $8,254 after allowance for doubtful
accounts of $3,026 and inventory of $6,380.
The Company's operating activities used cash of $168,525 in the 2000 Period and
generated cash of $57,073 in the 1999 Period. The Company's future liquidity
will be dependent on the Company's ability to 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.
8
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 November 11, 2000.
CARING PRODUCTS INTERNATIONAL, INC.
By: /s/ Susan A. Schreter
- - - - - - - - - - - - - - - - - - - - - - -
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
--------- ----- ----
/s/ Susan A. Schreter Acting Chairman and CEO November 11, 2000
- - - - - - - - - - - - - -
Susan A. Schreter