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, 2002
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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
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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, 2002
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Common stock, $.01 par value 23,504,000 shares
REPRO-MED SYSTEMS, INC.
TABLE OF CONTENTS
PART I PAGE
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ITEM 1. Financial Statements
Balance Sheet (Unaudited)- May 31, 2002 3
Statements of Operations (Unaudited)- for the three-months
ending May 31,2002 and May 31, 2001 4
Statements of Cash Flow (Unaudited) - for the three-months
Ending May 31,2002 and 2001 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 8
ITEM 2. Changes in Securities and Use of Proceeds 8
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 31,2002
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CURRENT ASSETS
Cash & Cash Equivalents .................................... $ 55,303
Accounts Receivable, net ................................... 168,728
Inventory .................................................. 561,610
Prepaid Expenses & Other Receivables ....................... 18,326
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TOTAL CURRENT ASSETS ........................................... 803,968
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EQUIPMENT & OTHER ASSETS
Total Equipment ............................................ 1,196,322
Less - Accumulated Depreciation ............................ (728,472)
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Net Book Value of Equipment ................................ 467,850
Deposits ................................................... 52,000
Other Assets ............................................... 47,631
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TOTAL EQUIPMENT & OTHER ASSETS ................................. 567,481
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TOTAL ASSETS ................................................... $ 1,371,449
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ........................................... $ 198,355
Demand loan from President ................................. 69,000
Accrued Expenses ........................................... 153,135
Bank Line of Credit Payable ................................ 200,000
Current Portion of Leases Payable .......................... 25,346
Current Portion Capital Gain ............................... 22,481
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TOTAL CURRENT LIABILITIES .................................. 668,316
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OTHER LIABILITIES
Long-Term Portion of Leases Payable ........................ 61,857
Deferred Capital Gain Income ............................... 354,075
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TOTAL LIABILITIES .............................................. 1,084,248
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STOCKHOLDERS' EQUITY
Preferred Stock, 8% Cumulative $.01
Par Value Authorized 2,000,000 Issued &
Outstanding 10,000 Shares (liquidation value $100,000) ..... 100
Common Stock, $.01 Par Value,
Authorized 50,000,000 Shares, Issued &
Outstanding 23,504,000(Includes 2,275,000
in Treasury Shares) Respectively ........................... 235,040
Additional Paid-in Capital ................................. 2,211,631
Accumulated Deficit ........................................ (2,017,571)
Treasury Stock at Cost ..................................... (142,000)
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TOTAL STOCKHOLDERS' EQUITY ..................................... 287,200
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ....................... $ 1,371,449
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See Accompanying Notes to Financial Statements
3
REPRO-MED SYSTEMS, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
FOR THE 3 MONTHS ENDED
MAY 31,2002 MAY 31,2001
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SALES
Net Sales of Products .............................. $ 435,242 $ 427,414
COST AND EXPENSES
Cost of Goods Sold ............................... 317,264 319,160
Selling, General & Administrative Expenses ....... 138,562 173,594
Research and Development ......................... 5,413 11,433
Depreciation and Amortization .................... 21,588 20,289
Equity Based Compensation ........................ 0 10,250
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TOTAL COST AND EXPENSES ............................ 482,827 534,727
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INCOME (LOSS) FROM OPERATIONS ...................... (47,586) (107,313)
Non-Operating Income (Expense)
Interest (Expense) ............................... (6,992) (3,741)
Interest & Other Income .......................... 5,103 2,997
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(1,889) (745)
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INCOME (LOSS) BEFORE INCOME TAXES .................. (49,474) (108,058)
Provision for Income Taxes ....................... (702) (411)
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NET INCOME (LOSS) AFTER TAXES ...................... (50,176) (108,469)
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Preferred Dividends ................................ 2,000 4,000
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS ................................ (52,176) (112,469)
EARNINGS (LOSS) PER COMMON SHARE
Basic ............................................ ($ 0.00) ($ 0.00)
Diluted .......................................... ($ 0.00) ($ 0.00)
See Accompanying Notes to Financial Statements
4
REPRO-MED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE THREE MONTHS ENDED
MAY 31,2002 MAY 31,2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) ............................................ ($50,176) $(108,469)
Adjustments to reconcile net (loss) to cash
used in operating activities:
Equity Based Compensation ........................ 0 10,250
Depreciation and Amortization .................... 21,588 20,289
Capital Gain - building lease .................... (5,621) (5,621)
Accounts Receivable .............................. 22,210 5,331
Inventories ...................................... 39,025 (21,773)
Prepaid Expenses ................................. (5,420) (39,383)
Other Assets ..................................... 1,434 (2,754)
Accounts Payable ................................. 9,244 55,222
Accrued Expenses ................................. 8,342 14,932
Leases Payable ................................... 10,460 (3,703)
Customers Deposits ............................... 0 (2,424)
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NET CASH USED BY (PROVIDED IN) OPERATIONS ............. 51,085 (78,102)
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CASH FLOWS USED BY INVESTING ACTIVITIES
Capital Expenditures ........................... (21,452) (6,058)
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NET CASH USED BY INVESTING ACTIVITIES ............ (21,452) (6,058)
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CASH FLOW PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from line of credit ....................... 0 105,000
Preferred stock dividends .......................... 0 (4,000)
NET CASH PROVIDED BY FINANCING
ACTIVITIES .......................................... 0 101,000
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NET INCREASE IN CASH .................................. 29,633 16,840
CASH, beginning of period ............................. 25,670 35,466
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CASH, end of period ................................... $ 55,303 $ 52,306
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Supplemental disclosures of Cash Flow Information:
Interest ........................................... $ 6,992 $ 3,741
Income Taxes ....................................... 702 411
See Accompanying Notes to 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 28,2002 included in the Form 10-KSB for the year then ended.
As shown in the accompanying interim financial statements, the Company incurred
a net loss of $50,176 during the three months ended May 31,2002. The Company
intends to raise additional capital or financing, to improve their liquidity.
These factors create substantial doubt as to the Company's ability to continue
as a going concern. These financial statements do not include any adjustments to
the financial statements that might be necessary should the Company be unable to
continue as a going concern.
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 31,2002, and the results of operations and cash flows for the
three-month periods ended May 31,2002 and 2001 have been included.
The results of operations for the three-month period ended May 31,2002, 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 28,2002.
Reclassification - certain reclassifications have been made to prior year
amounts to conform to current year presentation.
DEBT
As of May 31,2002, we have an outstanding balance of $200,000 on our bank line
of credit. The line agreement officially ended on June 30,2001 but the bank
renewed the line verbally through June 30,2002 and is in the process of
reviewing the line for a six-month extension.
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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
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 31,2002 AND 2001
Sales of our core products increased quarter over quarter ended May 31, 2002
with our Freedom60 sales increasing by 31% and Res-Q-Vac sales increasing by
37%. Net sales increased overall 2% from $427,414 (2001) to $435,242 (2002) for
the quarter despite the loss in sales of $81,000 from a major OEM customer for
the first quarter 2002 and reduced sales for a low margin product line that we
have been phasing out over the last year.
Gross profit increased to 27% of net sales in 2002 from 25% in 2001 primarily
resulting from reductions in material costs.
Selling, general and administrative expense decreased 20% from the 2001 to 2002
as a result of the reduction of sales and administrative personnel, and
decreased marketing and show expenses.
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Research and development expenses decreased 53% period to period due to the fact
that we enlisted outside engineering help in the first quarter 2001 but not in
the first quarter 2002.
There was no material change in depreciation and amortization expense during
this period.
Interest expense increased 87% as a result of the addition of tooling leases
after the first quarter of 2001 and the addition of a phone system lease during
the latter half of the first quarter of 2001.
LIQUIDITY AND CAPITAL RESOURCES
During June 2000, we negotiated a $200,000 line of credit with M&T Bank that is
guaranteed by the President and one of the directors. The line of credit was
intended for material purchases for new orders and tooling. As of May 31, 2002,
$200,000 has been advanced on the line of credit. Although the line expired on
June 30,2001, the bank verbally extended the line through June 30,2002.
Currently, the bank is in the process of reviewing our request to extend the
line for six months. The bank has assured the Company that if the line is not
renewed, there will be no requirement for immediate repayment of the line.
We are attempting to achieve and maintain positive cash flow by continuing to
increase sales for the FREEDOM60 and RES-Q-VAC, decreasing material costs and by
pursuing capital investment through debt or equity. The Company is working with
outside distributors to increase market share in the European markets for the
RES-Q-VAC, and to introduce the FREEDOM60 into the European market. Currently,
our distributor for the FREEDOM60 in Italy is marketing the product and has
received an initial order. We are in the process of validating new lower-cost
and more efficient vendors for our raw materials, which will assist us in
continuing to improve our margins on our current products. 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. The funds
available on May 31, 2002 are expected to meet cash requirements as planned
under current operating conditions at least for the next 12 months.
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
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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 31,2002.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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.
/s/ Andrew I. Sealfon July 15,2002
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
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