FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT
OF 1934
For the quarterly period ended May 31, 2001
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Commission File Number 0-12305
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REPRO-MED SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
New York 13-3044880
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24 Carpenter Road, Chester, NY 10918
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 469-2042
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 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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 31, 2001
Common stock, $.01 par value 23,504,000 shares
Repro-Med Systems, Inc.
Table of Contents
Part I PAGE
Item 1.
Financial Statements
Balance Sheet (Unaudited)- May 31, 2001 3
Statements of Operations (Unaudited)- for the three-months
ending May 31,2001 and May 31, 2000 4
Statements of Cash Flow(Unaudited) - for the three-months
Ending May 31,2001 and 2000 5
Notes to Unaudited Financial Statements 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II
Item 1.
Legal Proceedings 9
Item 2.
Changes in Securities and Use of Proceeds 9
Item 3.
Defaults Upon Senior Securities 9
Item 4.
Submission of Matters to a Vote of Security Holders 9
Item 5.
Other Information 9
Item 6.
Exhibits and Reports on Form 8-K 9
2
REPRO-MED SYSTEMS, INC.
BALANCE SHEET
UNAUDITED
ASSETS May 31,2001
CURRENT ASSETS
Cash & Cash Equivalents $52,306
Accounts Receivable, net 202,256
Inventory 608,638
Prepaid Expenses & Other Receivables 90,970
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TOTAL CURRENT ASSETS 954,170
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EQUIPMENT & OTHER ASSETS
Total Equipment 1,105,724
Less - Accumulated Depreciation (648,058)
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Net Book Value of Equipment 457,666
Deposits 40,000
Other Assets 52,830
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TOTAL EQUIPMENT & OTHER ASSETS 550,496
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TOTAL ASSETS $1,504,666
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $157,359
Accrued Expenses 147,367
Bank Line of Credit Payable 175,000
Current Portion of Leases Payable 11,109
Current Portion Capital Gain 22,481
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Total Current Liabilities 513,316
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OTHER LIABILITIES
Customer Deposits 346
Long-Term Portion of Leases Payable 22,217
Deferred Capital Gain Income 376,555
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TOTAL LIABILITIES 912,434
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STOCKHOLDERS' EQUITY
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Preferred Stock, 8% Cumulative $.01
Par Value Authorized 2,000,000 Issued &
Outstanding 10,000 Shares 100
Common Stock, $.01 Par Value,
Authorized 50,000,000 Shares, Issued &
Outstanding 23,504,000
Respectively 235,040
Unearned Compensation (30,750)
Additional Paid-in Capital 2,211,631
Accumulated Deficit (1,681,790)
Treasury Stock at Cost (142,000)
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TOTAL STOCKHOLDERS' EQUITY 592,232
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,504,666
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3
REPRO-MED SYSTEMS, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
FOR THE 3 MONTHS ENDED
May 31,2001 May 31,2000
SALES
Net Sales of Products $427,414 $556,614
COST AND EXPENSES
Cost of Goods Sold 319,160 334,198
Selling, General & Administrative Expenses 173,594 177,975
Research and Development 11,433 13,024
Depreciation and Amortization 20,289 21,415
Equity Based Compensation 10,250 0
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TOTAL COST AND EXPENSES 534,727 546,612
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INCOME (LOSS) FROM OPERATIONS (107,313) 10,002
Non-Operating Income (Expense)
Interest (Expense) (3,741) 0
Interest & Other Income 2,997 200
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(745) 10,202
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INCOME (LOSS) Before Income Taxes (108,058) 10,202
Provision for Income Taxes (411) 0
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NET INCOME (LOSS) AFTER TAXES (108,469) 10,202
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Preferred Dividends 4,000 4,000
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS (112,469) 6,202
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 23,504,000 23,016,500
EARNINGS (LOSS) PER COMMON SHARE
Basic ($0.00) $0.00
Diluted ($0.00) $0.00
4
REPRO-MED SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE THREE MONTHS ENDED
May 31,2001 May 31,2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Income ($108,469) $10,202
Adjustments to reconcile net (loss) income to cash
used in operating activities:
Equity Based Compensation 10,250 0
Depreciation and Amortization 20,289 21,415
Deferred gross profit - building lease (5,621) (5,620)
Accounts Receivable 5,331 (12,782)
Inventories (21,773) (70,433)
Prepaid Expenses (39,383) (11,005)
Other Assets (2,754) (181)
Accounts Payable 55,222 83,299
Accrued Expenses 14,932 2,560
Leases Payable (3,703) 0
Customers Deposits (2,424) (70,140)
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NET CASH USED BY (PROVIDED IN) OPERATIONS (78,102) (52,685)
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CASH FLOWS USED BY INVESTING ACTIVITIES
Capital Expenditures (6,058) (5,283)
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NET CASH USED BY INVESTING ACTIVITIES (6,058) (5,283)
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CASH FLOW PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from line of credit 105,000 0
Preferred stock dividends (4,000) 0
Issuance of Common Stock/Exercise of Options 0 27,000
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 101,000 27,000
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NET INCREASE (DECREASE) IN CASH 16,840 (30,968)
CASH, beginning of period 35,466 167,085
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CASH, end of period $52,306 $136,117
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Supplemental disclosures of Cash Flow Information:
Interest $3,741 $0
Income Taxes 411 801
*See accompanying notes to consolidated financial statements
5
Repro-Med Systems, Inc.
Notes to the Unaudited Financial Statements
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with instructions to Form 10-QSB. Accordingly, they do
not include all of the information and disclosures required for annual financial
statements. These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes for the year ended
February 28,2001 included in the Form 10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting
of normal recurring accruals) necessary to present fairly the Company's
financial position as of May 31,2001, and the results of operations and cash
flows for the three-month periods ended May 31,2001 and 2000 have been included.
The results of operations for the three-month period ended May 31,2001,
are not necessarily indicative of the results to be expected for the full year.
For further information, refer to the financial statements and footnotes thereto
included in the Company's Form 10-KSB as filed with the Securities and Exchange
Commission for the year ended February 28,2001.
Reclassification - certain reclassifications have been made to prior
year amounts to conform to current year presentation.
Debt
As of May 31,2001, we had advanced $175,000 on our bank line of credit.
The line agreement officially ended on June 30,2001 but the bank is in the
process of reviewing the line for a renewal of one year based on our request.
Part I Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
This Quarterly Report on Form 10-QSB contains certain "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995) and information relating to us that are based on the beliefs of the
management, as well as assumptions made by and information currently available.
Our actual results may vary materially from the forward-looking statements made
in this report due to important factors such as, recent operating losses,
uncertainties associated with future operating results, unpredictability related
to Food and Drug Administration regulations, introduction of competitive
products, limited liquidity, reimbursement related risks, government regulation
of the home health care industry, success of the research and development
effort, market acceptance of FREEDOM60, availability of sufficient capital to
continue operations and dependence on key personnel. When used in this report,
the words "estimate," "project," "believe," "anticipate," "intend," "expect" and
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similar expressions are intended to identify forward-looking statements. Such
statements reflect current views with respect to future events based on
currently available information and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. These
statements involve risks and uncertainties with respect to the ability to raise
capital to develop and market new products, acceptance in the market place of
new and existing products, ability to penetrate new markets, our success in
enforcing and obtaining patents, obtaining required Government approvals and
attracting and maintaining key personnel that could cause the actual results to
differ materially. Repro-Med does not undertake any obligation to release
publicly any revision to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Three months ended May 31,2001 and 2000
Sales of our core products increased quarter over quarter ended May 31,
2001 with our Freedom60 sales increasing by 14% and Res-Q-Vac sales increasing
by 11%. However net sales decreased overall 23% from $556,614 (2000) to $427,414
(2001) for the quarter primarily due to a decrease of sales in product lines
which we are eliminating due to low margins, a decrease in monthly sales for one
of our OEM customers, and for, the recognition of revenue in 2000 for another
OEM customer.
Gross profit decreased to 25% of net sales in 2001 from 39 % in 2000
primarily resulting from the timing of revenue recognition for an OEM sale for
product that was sold in a prior period and the sale completed and recognized
throughout fiscal year 2000.
Selling, general and administrative expense experienced a minor
decrease of 2% for the three-month period versus 2000.
Research and development expenses decreased 12% period to period as a
result of the resignation of our R&D engineer during the second quarter 2000.
There was no material change in depreciation and amortization expense
during this period.
Interest expense increased 100% as a result of an equipment lease
payable that began in the second quarter of 2000 and due to an outstanding
balance on our bank line of credit during 2001.
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Liquidity and Capital Resources
During June 2000, we negotiated a $200,000 line of credit with Premier
Bank that is guaranteed by the President and one of the directors. The line of
credit is intended for material purchases for new orders and tooling. As of May
31, 2001, $175,000 has been advanced on the line of credit. The Company drew
down the remaining $25,000 prior to the expiration of the line on June 30,2001.
We have requested that the bank renew the line for an additional year.
Currently, the bank is in the process of reviewing our request. The bank has
assured the Company that if the line is not renewed, there will be no immediate
repayment of the line.
Despite the negative cash flow resulting from a substantial loss for
the three months ended May 31,2001, the Company has sufficient capital for our
ongoing needs based on anticipated sales growth in the next six months and
maintaining careful control of expenses. We have demonstrated our ability to
control costs and believe we would be able to offset any unanticipated decreases
in revenues with additional reductions in overhead, materials, and labor. The
funds available on May 31, 2001 are expected to meet cash requirements as
planned under current operating conditions at least for the next 12 months.
To enable us to significantly increase marketing efforts of our key
products, and to develop and market our new technology devices such as the "No
Overflow Protector" for our Res-Q-Vac among others, we have spoken to various
financial people who have offered to assist the Company to raise capital. There
is no assurance that these people will be successful in their efforts or that
the cost of the capital will be favorable to the company.
Subsequent Events
As of July 1, 2001, management has restructured the sales and marketing
department. Our former VP of sales and marketing has been moved into the field
to increase our direct sales effort, product awareness, and market share for the
FREEDOM60 and Res-Q-Vac. We are currently operating with 6 active outside
independent sales representatives. We have recently trained 5 additional
representatives and will be continuing to train additional representatives in
the coming months. We anticipate operating with approximately 20 active
representatives by December 31, 2001.
In conjunction with the restructuring, we are utilizing an outside
telemarketer to assist us in increasing our presence in the military and provide
follow up on potential leads from trade shows and other inquiries. Management
has also developed a marketing strategy to expedite the closing process on sales
for the FREEDOM60.
We are in the early stages of negotiation with a major presence in the
Emergency Market to discuss synergies in our product lines. There can be no
assurance that these negotiations will end in a definitive agreement between the
two companies or that such an agreement will be beneficial to our Company.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is neither a party to any material litigation, nor to the
knowledge of the officers and directors of the Company, is there any other
material litigation threatened against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the Company
during the quarter ended May 31,2001.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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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.
REPRO-MED SYSTEMS, INC.
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/s/ Andrew I. Sealfon July 13,2001
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
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