SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM l0-QSB
QUARTERLY REPORT
Pursuant to sections 13 or 15(d) of The Securities Exchange Act of 1934
FOR THE QUARTER ENDED NOVEMBER 30, 1997
Commission File Number 0-12305
REPRO-MED SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3044880
- ------------------------------- -----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
24 Carpenter Road, Chester, New York 10918
- ------------------------------------ ------------------
(Address of principle executive offices) (Zip Code)
(914) 469-2042
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
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 __
At November 30, 1997 the registrant had outstanding 22,142,000 shares of
Common Stock, $.01 par value.
PART I
Item 1. Financial Statements
Balance Sheets - November 30, 1997, November 30, 1996 and February 28,1997.
Statements of Income - For the three and nine month periods ended November
30, 1997 and November 30, 1996.
Statements of Cash Flow - November 30, 1997 and November 30, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II
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 and Reports on Form 8-K
None
PART I, Item 1 - Financial Statements
Repro-Med Systems, Inc. And Subsidiary
Consolidated Balance Sheets
Nov 30,1997 Nov 30,1996 Feb 28,1997
Assets
Current Assets
Cash and Cash Equivalents $ 902,407 $ 1,014,637 $ 734,076
Accounts Receivable 311,085 119,260 146,506
Inventory 729,291 514,716 523,967
Prepaid Expenses & Other Receivables 49,042 68,671 78,126
Deferred Taxes - Current 156,000 136,686 156,000
--------- --------- ---------
Total Current Assets 2,147,825 1,853,970 1,638,675
--------- --------- ---------
Land,Property,Equipment and Other Assets
Land 290,303 409,500 290,303
Property and Equipment, Net 1,417,275 1,143,183 1,324,856
Deferred Taxes - Non-current 131,659 0 23,659
Other Assets, Net 67,160 66,987 73,190
--------- --------- ---------
Total Property, Equip. And Other Assets 1,906,397 1,619,670 1,712,008
--------- --------- ---------
Total Assets $ 4,054,222 $ 3,473,640 $ 3,350,683
============ =========== =========== ===========
Liabilities And Stockholders' Equity
Current Liabilities
Accounts Payable $ 141,345 $ 112,393 119,156
Current Portion Long-term Debt 70,188 14,420 18,403
Bank Line of Credit Payable 160,000 0 0
Other Current Liabilities 84,162 91,364 56,816
--------- --------- ---------
Total Current Liabilities 455,695 218,177 194,375
--------- --------- ---------
Long Term Debt 1,053,895 878,046 870,163
--------- --------- ---------
Total Liabilities 1,509,590 1,096,223 1,064,538
--------- --------- ---------
Minority Interest In Subsidiary 300,669 112,653 118,824
--------- --------- ---------
Stockholder's Equity
Preferred Stock, 8% Cumulative $.01 Par
Value, 2,000,000 shares authorized,
10,000 issued and outstanding 100 100 100
Common Stock, $.01 Par Value,
50,000,000 shares authorized,
22,142,000, issued and outstanding 221,420 221,420 221,420
Warrants Outstanding 140 140 140
Additional Paid-In Capital 3,040,662 3,040,662 3,040,662
Accumulated (Deficit) (876,359) (855,558) (953,001)
Treasury Stock at Cost (2,275,000,
275,000 and 2,275,000 shares at
respective dates), (142,000) (142,000) (142,000)
--------- --------- ---------
Total Stockholder's Equity 2,243,963 2,264,764 2,167,321
--------- --------- ---------
Total Liabilities And Stockholders' $ 4,054,222 $ 3,473,640 $ 3,350,683
Equity ========= ========= =========
==================================
Repro-Med Systems, Inc. And Subsidiary
Consolidated Statements Of Income
For Three Months Ended For Nine Months Ended
Nov 30,1997 Nov 30,1996 Nov 30,1997 Nov 30,1996
Sales:
Product Sales $ 440,728 $ 769,023 $1,195,819 $2,125,273
Sale of Impotence Treatment 0 0 708,000 0
------- ------- --------- ---------
440,728 769,023 1,903,819 2,125,273
------- ------- --------- ---------
Costs And Expenses:
Cost of Goods Sold 281,442 309,008 595,537 894,675
Selling, General &
Administrative Expenses 280,463 270,674 876,068 760,566
Research and Development 21,358 49,796 82,582 164,496
Depreciation and
Amortization 31,880 22,838 96,204 62,654
--------- ------- --------- ---------
615,143 652,316 1,650,391 1,882,391
--------- ------- --------- ---------
Net Income (Loss)
From Operations (174,415) 116,707 253,428 242,882
Non-Operating Income (Expense):
Licensing - Maintenance
Payments (Credits) 0 0 (75,000) 0
Licensing - Non-compete
Payments 0 0 0 87,800
Rental Income 21,525 21,525 64,575 50,464
Interest (Expense) (31,427) (20,171) (80,845) (43,735)
Interest & Other Income 7,032 10,876 22,388 32,698
-------- -------- -------- --------
(2,870) 12,230 (68,882) 127,227
Income (Loss) Before
Minority Interest Share of
Operations (177,285) 128,937 184,546 370,109
Minority Interest In
(Income) Loss of Subsidiary 10,199 9,359 (181,787) 2,908
--------- -------- --------- ---------
Net Income Before Income
Taxes (167,086) 138,296 2,759 373,017
Provision (Benefit) For (55,719) 48,308 (81,943) 140,071
Income Taxes
--------- -------- --------- ---------
Net Income $(111,367) $ 89,988 $ 84,702 $ 232,946
========== ========= ======== ========= =========
Net Income Per Common Share $ (.01) $ 0.00 $ 0.00 $ 0.01
=========================== ========= ======== ========= =========
Repro-Med Systems, Inc. And Subsidiary
Statements Of Cash Flows
For Nine Months Ended
Nov 30, 1997 Nov 30,1996
Cash Flows From Operating Activities
Net Income (Loss) $ 84,702 $ 232,946
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating
Activities:
Income (Loss) Of Minority Interests 181,787 (2,908)
Depreciation and Amortization 96,204 62,654
Decrease (Increase) In Accounts
Receivable (164,579) (31,771)
Decrease (Increase) In Inventory (205,324) 28,149
Decrease (Increase) In Prepaid
Expenses & Other Receivables 29,084 (2,781)
Decrease (Increase) In Deferred Taxes (108,000) 120,441
Increase (Decrease) In Accounts Payable 22,189 (1,809)
Increase (Decrease) In Other Current
Liabilities 27,345 (1,768)
--------- -----------
Net Cash Provided By Operating
Activities (36,592) 403,153
--------- -----------
Cash Flows From Investing Activities
(Acquisition) of Land, Property and
Equipment (179,079) (1,289,665)
(Acquisition) of Other Assets (3,515) (1,274)
--------- -----------
Net Cash (Used) by Investing
Activities (182,594) (1,290,939)
--------- -----------
Cash Flows From (Used By) Financing
Activities
Proceeds From Mortgage 0 900,000
Proceeds From Term Loan 261,583 0
Proceeds (Repayment) Line Of Credit 160,000 0
(Acquisition) Disposition of
Treasury Stock 0 (120,000)
Preferred Stock Dividend (8,000) (4,000)
Proceeds From Issuance of Common
Stock 0 8,000
Repayment Of Mortgage and Term Loan (26,066) (7,534)
--------- -----------
Net Cash Provided (Used) by
Financing Activities 387,517 776,466
--------- -----------
Increase (Decrease) In Cash and Cash
Equivalents 168,331 (111,320)
Cash and Cash Equivalents -
Beginning of Year 734,076 1,125,957
--------- -----------
Cash and Cash Equivalents - End of
Period $ 902,407 $ 1,014,637
================================== ========= ===========
Supplementary Data - Interest Paid $ 80,845 $ 43,735
Repro-Med Systems, Inc. And Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements included in the
Company's Annual Report),
(1) Management's Statement
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-KSB.
PART I, Item 2
Repro-Med Systems, Inc. And Subsidiary
Management's Discussion and Analysis of Financial Condition and Results of
Operations for use with 10-QSB for the Quarter Ended November 30, 1997
Capital Resources and Liquidity
Cash and equivalents on a consolidated basis were $902,407 at November 30,
1997, as compared to $1,014,637 at November 30, 1996, a decrease of
$112,230. Cash and equivalents includes cash of the Company's subsidiary,
Gamogen, Inc., of $472,073 at November 30, 1997, and $12,747 at November
30, 1996.
Net working capital on a consolidated basis at November 30, 1997 was
$1,692,130, as compared to $1,635,793 at November 30, 1996. Net working
capital included Gamogen, Inc. net working capital of $571,645 at November
30, 1997, and $103,467 at November 30, 1996.
The Company's liquidity improved as reflected in the nine month increase in
its net working capital of $247,830 versus the balance at February 29, 1997
of $1,444,300. The nine month increase in net working capital consists of
increases in cash and cash equivalents, accounts receivable, and inventory,
offset in part by added short term bank borrowings of $211,785. The nine
month increase in working capital resulted primarily from the Company's
nine month operating income of $253,428 which resulted primarily from the
sale of Gamogen's impotence oral treatment offset in part by reduced sales
of OEM products and lower margins on product sales due to new product
development and production startup on new products and an increase in
in long-term debt of $183,732. The improvement in working capital
resulting from the increase in long term debt was limited in part
by $91,659 in purchases of production tooling and equipment and patent
expenditures for the Freedom60 Syringe Infusion System and $71,209 in
purchases for production tooling for the OEM medical suction device (see
product descriptions below). Versus the balance at November 30, 1996 the
Company's net working capital increased $56,337 primarily due to increases
in accounts receivable and inventory offset in part by purchases of
production tooling and equipment and patent expenditures for the Freedom60
Syringe Infusion System and the OEM medical suction device.
The Company has developed a non-electric, portable I.V. delivery system,
trade-named the Freedom60 Syringe Infusion System ("Freedom60 System")
which employs a unique pump, standard syringes, and proprietary disposable
tubing resulting in a very low cost per infusion. The Company has secured
the necessary FDA approvals on the Freedom60 System and completed product
engineering, the purchase of production tooling and component parts
inventory, and long-term supply agreements for the syringe and disposable
tubing. The Company initiated production of the Freedom60 System in April
1997. In May 1997 the Company initiated advertising in US infusion medical
journals and promotion at various US and international trade expositions.
Effective July 1997, the Company entered into an agreement with a large
organization of independent US medical equipment and supply dealers for the
exclusive distribution rights for the Freedom60 System in certain US
medical markets, including hospitals, nursing homes, and home infusion
service providers. Although no minimum purchase commitments are required
under this agreement, the agreement includes, as a condition to maintaining
these exclusive distribution rights, the following annual dealer purchase
volumes of infusion pumps and disposable syringe/tubing sets, beginning
July 1997:
Year 1 Year 2 Year 3
Infusion Pumps 7,000 15,000 25,000
Syringe/Tubing Sets 635,000 1,600,000 2,400,000
For the first year of the agreement the dealer purchase price per unit on
the infusion pumps and disposable syringe/tubing sets are $31 per pump and
$1.61 per set. Under the agreement the Company will rebate to the
organization, on a monthly basis, an amount equal to 2.5% of the aggregate
value of purchases by the organization's dealers. There can be no guarantee
that the organization's dealers will be successful in establishing
distribution of the Freedom60 Syringe I.V. Infusion System, or if
distribution is established that the Company or the organization's dealers
will be successful in marketing and selling of the device, or that the
annual dealer purchase volumes, to maintain exclusive distribution rights,
will be achieved. Total sales for the period ended November 30, 1997 of the
Freedom60 Syringe I.V. Infusion System were $61,376.
The Company has developed a medical device for an OEM customer based on the
Company's suction technology. The Company's agreement with its OEM customer
includes certain advance payments to help defer Company expenditures for
engineering and production tooling costs related to the development of the
medical suction device. As of November 30, 1997 the Company has received
advance payments totaling $93,030. Under the Company's agreement with its
OEM customer the Company will manufacture and sell this medical suction
device to its OEM customer. The Company initiated production of the OEM
medical suction device in September 1997 and initiated shipment of this
product to its customer in November 1997. Total sales in November 1997 of
the OEM medical suction device were $19,360. Under the terms of its
agreement for the development and manufacture of the OEM medical suction
device and contingent on the successful marketing of the device by its OEM
customer, the Company anticipates annual revenues of approximately $800,000
to $900,000 from the sale of this medical suction device. There can be no
guarantee, however, that the Company's OEM customer will be successful in
marketing of the device. The OEM medical suction device may compete with
the Company's other OEM products, but in management's opinion will not
significantly reduce sales of other OEM products.
On July 10, 1993 the Company's 58% owned subsidiary, Gamogen, acquired the
rights to an Oral Treatment for Male Impotence developed by Dr. Zorgniotti.
On April 12, 1994 the Board of Directors approved and on April 14, 1994
Gamogen signed with Zonagen, a small US based biotechnology company, an
agreement under which Zonagen acquired all rights to Gamogen's Oral
Treatment for Male Impotence ("Impotence Agreement"). In exchange for the
above rights Gamogen received from Zonagen $100,000 in cash and, subject to
certain FDA approvals and Gamogen's agreement not to compete, future
payments of $200,000 in restricted common stock of Zonagen, and royalties
on Zonagen's future sales of the Oral Treatment.
In the year ended February 1995 Gamogen recorded income from the Impotence
Agreement of $47,107 ($100,000 in licensing payments made by Zonagen less
related expenses of $52,893). In the year ended February 1996 no payments
were received by Gamogen under the Impotence Agreement.
On May 28, 1996 a stock payment was received by Gamogen in the form of
19,512 restricted common stock shares of Zonagen in accordance with certain
non-compete terms of the Impotence Agreement. On June 20, 1996 Gamogen sold
the 19,512 restricted shares to a small group of private investors for
$87,800, approximately 50% of the then NASDAQ market price for Zonagen,
Inc. non-restricted common stock.
On January 24, 1997 the Board of Directors approved and signed with Zonagen
a conditional amendment to the Impotence Agreement granting Zonagen the
right ("Option") to amend the Impotence Agreement eliminating the
following:
1) Gamogen's rights to royalties on Zonagen's future sales of the Oral
Treatment;
2) Gamogen's rights to market the Oral Treatment in countries where Zonagen
does not timely obtain regulatory approval for and commence marketing of the
Oral Treatment.
The Option was conditioned on the payment to Gamogen the amount of $750,000
("Option Price") if the Option were exercised by January 24, 1998 less any
Maintenance Payments (see below) received by Gamogen. The Option included
increases in the Option Price for later exercise of the Option through
January 24, 2000.
Under the conditional amendment Zonagen was granted the option, provided
however, that Zonagen make the following payments ("Maintenance Payments")
in cash to Gamogen: $75,000 upon the execution of the conditional amendment
and $75,000 on each July 24 and January 24 which occurs after the execution
of the conditional amendment and before Zonagen's exercise of the Option.
On January 24, 1997 Gamogen received from Zonagen the initial Maintenance
Payment of $75,000 which Gamogen recorded as licensing income. In July 1997
Gamogen received a second maintenance payment of $75,000 under the
conditional amendment.
In November 1997 Gamogen negotiated with Zonagen. for revision to the
Conditional Amendment Number 1 of The Assignment Agreement. In November
1997 the Board of Directors of Gamogen approved and signed with Zonagen a
conditional amendment, Amendment Number 2 to the Assignment Agreement,
establishing an option price of $708,000 if the option were exercised on or
before September 30, 1997. On August 31, 1997 Gamogen recorded a $558,000
accounts receivable which results from the sale of the impotence oral
treatment for $708,000 reduced by credits for maintenance payments
previously received of $150,000. Gamogen received payment from Zonagen for
the full amount of this account receivable on October 1, 1997. As a result
of this payment Zonagen has exercised the Option and Gamogen is not
entitled to further payments under the Assignment Agreement and its
amendments.
In August 1997 Gamogen recorded general and administrative expenses of
$55,660 for certain administrative costs and other expenses related to the
sale of the impotence oral treatment and the conditional amendments which
are included in the Company's selling, general, and administrative expenses
for the quarter ended August 31, 1997.
Beyond the above items, the Company's ability to increase its revenue and
develop other new products is primarily based on capital it derives from
current operations.
On April 18, 1995 Repro-Med executed a formal Contract Of Sale with Key
Bank of New York ("Key Bank") on a facility in Chester, NY ("Chester
facility") for the purpose of housing all operations of Repro-Med, Gamogen,
and Gyneco. The purchase was completed on April 30, 1996. The price for the
facility was $1,030,000. The purchase of the Chester facility was financed
in part by a $900,000 mortgage loan from Key Bank. The mortgage is a 10
year loan with a 20 year amortization rate and annual interest at a rate of
8.82% for years 1-5. For years 6-10 the interest rate shall be the lesser
of either the Key Bank base rate plus 0.5% or a fixed rate to be negotiated
if offered by Key Bank. The total annual mortgage payment for years 1-5
including principal and interest, is $95,924, payable in equal monthly
installments beginning June 15, 1996. For the nine months ended November
30, 1997 a total of $59,012 in interest expense on the mortgage was
recorded. Total mortgage principal payments for the nine months ended
November 30, 1997 were $12,960. A portion of the Chester facility is leased
to Key Bank, for branch operations, on a net/net/net rent basis for 20
years at annual rent of $86,100 for years 1 through 10 and $99,990 for
years 11 through 20. For the nine months ended November 30, 1997 a total of
$64,575 in rent, exclusive of property tax rent allocations have been paid
by Key Bank. The formal lease contract required an $86,100 security deposit
from Key Bank and additional rent payments by Key Bank of 35% of all
property taxes paid. The new facility is expected to improve Repro-Med and
Gyneco manufacturing efficiencies and provide additional space for
expansion of operations. The total expenditure in the fiscal year ended
February 1996 for this real estate purchase was $78,736, which included a
$55,000 deposit. The total expenditure, net of the mortgage proceeds of
$900,000, in the fiscal year ended February 1997 for this real estate
purchase and certain capital improvements, and other related legal and
engineering costs was $227,643. The total expenditure in the fiscal nine
month period ended November 30, 1997 for capital improvements related to
this real estate purchase was $4,467.
In a transaction related to the purchase of the Chester facility on April
30, 1996, the Company secured from Key Bank of New York a line of credit of
$300,000. At November 7, 1997 the Company had outstanding debt of $260,000
on this line of credit. The line of credit was due on November 30, 1997 and
was paid in full and closed on November 8, 1997. On November 8, 1997, the
Company secured from Key Bank of New York a $300,000 four-year term loan
and a new line of credit of $500,000. At November 30, 1997 the Company had
outstanding debt of $261,583 on the 4-year term loan and $160,000 on the
line of credit. The proceeds of the term-loan were used to pay $250,000 of
the outstanding balance of the previous line of credit of $260,000. The
interest rate on the term loan is fixed at an annual rate of 8.83%.
Principal payments on the term loan are monthly beginning November 8, 1997
at a rate of $6,216 per month, plus accrued interest to date. The interest
rate on the line of credit is prime rate plus one-half of one percent
(currently 9.0% per annum).
On October 31, 1995, the Company redeemed in a private transaction 275,000
shares of common shares at a price of $0.08 per share or a total of
$22,000. On November 10, 1996, the Company redeemed in a private
transaction 2,000,000 shares of common shares at a price of $0.06 per share
or a total of $120,000. The 2,275,000 shares redeemed were previously
restricted in part as to their sale under "Rule 144" of the Securities and
Exchange Act. The 2,000,000 shares redeemed are subject to a ten year
voting agreement dated June 30, 1992 under which Mr. Andrew I. Sealfon,
President and Chairman of Repro-Med has the exclusive right to vote all the
shares covered under the voting agreement. The Treasury Stock shares while held
by the Company will be voted exclusively by Mr. Sealfon as required by the
voting trust. Treasury Stock shares may be sold at a future time or held by the
Company for corporate use.
The Osbon Medical Systems division of Imagyn Medical Inc., formerly
Urohealth Systems, Inc., ("Osbon") OEM product purchases represented 61% of
the Company's total sales for the fiscal year, ending February 1997.
Osbon markets the Company's OEM products in the impotence vacuum device
market. Management believes that Osbon presently controls a substantial
portion of the impotence vacuum device market. Other products have recently
been developed for Osbon which compete with the Company's current OEM
products and are anticipated to be manufactured and marketed directly by
Osbon. These new products were introduced by Osbon in direct competition to
the Company's OEM products in June 1996 and are sold under the trade name
"Esteem" ("Esteem products"). As a result the Company has seen a decline in
sales of its OEM products to Osbon. Sales of OEM products to Osbon for the
fiscal year ended February 1997 were $1,468,715, a decline of $676,008 from
the previous fiscal year. Based on orders to-date and discussions with
Osbon concerning anticipated purchases, management estimates sales to Osbon
in the fiscal year ended February 1998 may be approximately 50% to 60%
lower as compared to fiscal 1997. These estimates are based on the
assumption that Osbon can continue to successfully manufacture and generate
significant market acceptance for the Esteem products.
During the twelve month period ended March 1996, the Company, acting in
accordance with its written agreement with Osbon for the manufacture by
Repro-Med of the Esteem products ("Esteem Agreement"), cooperated in and
provided extensive work in testing, validation, design analysis and problem
solving, prototyping and generating and providing information concerning
performance and improvements to the Esteem products design. In furtherance
of the Esteem Agreement Repro-Med provided Osbon related information
concerning Repro-Med's proprietary product design, materials, and
manufacturing processes. Management believes that Repro-Med's assistance
was vital to Osbon's attempts to complete the design and facilitate the
timely manufacture of the Esteem products. Throughout this time period the
Company advised Osbon of numerous engineering design faults related to the
manufacturability, quality, and customer use of the Esteem products which
Repro-Med had discovered through its testing and validation work on the
Esteem products. These faults were primarily the result of either design
specifications provided Osbon by its contract engineers or other items
initiated by Osbon. A number of these faults were significant and resulted
in delays throughout the program. In March 1996 the Company forthrightly
advised Osbon that, based on the Company's current knowledge of the status
of the design, that confirmation of certain production scheduling requested
by Osbon was unrealistic and could not reasonably be achieved, namely the
production and delivery of 7,000 Esteem products by May 15, 1996. In April
1996 Osbon advised that it was withdrawing its commitment to Repro-Med for
manufacture of the Esteem products and had secured other options for
manufacture of these products. No prior notice was provided the Company by
Osbon. Despite repeated requests to Osbon the Company has not received an
explanation for this action. The Company has advised Osbon that Repro-Med
is due compensation for its work to-date on the Esteem products and for use
of its proprietary design and manufacturing information. The Company has
also advised Osbon that Repro-Med is available to initiate the manufacture of
the Esteem products in accordance with its written agreement. The Company
intends to seek to resolve these matters on an amicable basis with Osbon. To
date no resolution has been agreed to. Osbon remains a significant and important
customer of Repro-Med.
Repro-Med sales of OEM products to Osbon in the quarter ended November 30,
1997 were $188,829 or 43% of sales. Repro-Med sales of OEM products to
Osbon in the quarter ended November 30, 1996 were $511,872, or 67% of
sales. Repro-Med sales of OEM products to Osbon in the nine month period
ended November 30, 1997 were $460,556, or 39% of product sales and 24% of
total sales. Repro-Med sales of OEM products to Osbon in the nine month
period ended November 30, 1996 were $1,395,899, or 66% of product sales and
total sales.
Excessive purchases of OEM products by Osbon in the quarter ended November
30, 1996 resulted in a large increase in Osbon inventory of the Company's
OEM products. Due to subsequent efforts by Osbon to reduce these high
inventory levels, sales to Osbon in the fiscal quarter ended February 1997
were at reduced levels and totaled $72,816. Sales to Osbon increased in the
fiscal quarter ended May 31, 1997 and totaled $111,888. Sales to Osbon
recovered further in the fiscal quarters ended August 1997 and November
1997, totaling $159,840 and $188,829, respectively, per quarter.
Management continues its optimism that company revenues will increase due
to continued growth in sales of the Res-Q-Vac, introduction of the Syringe
I.V. Infusion System, sale of the OEM medical suction device, limiting the
impact of the decline in its OEM product sales to Osbon. The Company is
continuing to develop new products and expand its operations. Management is
seeking additional sources of capital to enable the Company's product
development to proceed at a more aggressive pace. Management believes,
however, that the Company's expansion can continue on the basis of
currently available funds, which includes working capital of $1,692,130,
and additional cash flow derived from operations.
Any statements which are not historical facts contained in this report are
forward looking statements that involve risks and uncertainties, including
but not limited to those relating to the uncertainty of expected purchases
of OEM products by Osbon, other unexpected increases or decreases in sales
or manufacturing costs of the Company's products, market acceptance and
product demand for the Company's Syringe I.V. Infusion System, uncertainty
related to Food and Drug Administration or other government regulation, and
other risks identified in the Company's Securities and Exchange Commission
filings.
Results of Operations
Results For Three Months Ended November 30, 1997 As Compared With Three
Months Ended November 30, 1996:
In the three months ended November 30, 1997 the loss from operations was
$174,415 as compared to income from operations of $116,707 in the three
months ended November 30, 1996. The loss from operations resulted primarily
from an anticipated decline in sales of OEM products to Osbon of $323,043
(see above), increased manufacturing costs and labor inefficiencies related
to the development and production startup of both the OEM medical suction
device and the Freedom60 Syringe I.V. Infusion System and increased
depreciation and amortization expense related to the Chester facility. Total
product sales sales for the three months ended November 30, 1997 were $440,728,
down $328,295 as compared to product sales of $769,023 for the three months
ended November 30, 1996. The decline in product sales results from lower
sales of OEM products to Osbon. The three month decline in sales was limited
by new products revenues as reflected in sales of the Freedom60 Syringe I.V.
System and the OEM medical suction device of $20,320 and $19,140, respectively.
The decline in sales of OEM products to Osbon and the increased manufacturing
costs related to the development and production startup of both the OEM
medical suction device and the Freedom60 Syringe I.V. Infusion System are
reflected in the decline in margins on cost of goods sold to $159,286 or
36% of sales in the current fiscal quarter as compared to $460,015 or 60%
of sales in the same quarter of the prior fiscal year. Management
anticipates improvement in the Company's margins on cost of goods sold as a
result of anticipated increases in the volume of sales of both the OEM
medical suction device and the Freedom60 Syringe I.V. Infusion System,
reductions in development and production startup related manufacturing
costs, and improvement in labor efficiencies on the OEM medical suction
device and the Freedom60 Syringe I.V. Infusion System. The loss from
operations was limited by lower research and development expense versus the
same quarter of the prior fiscal year. Research and development expenses,
in the quarter ended November 1997 were reduced by $38,030 in advance
payments for the new OEM medical suction device. Selling, general, and
administrative expenses were $280,463. Selling, general, and administrative
expenses increased $9,789, versus the same quarter of the prior year, due
primarily to increased marketing costs related to the Freedom60 System.
In the quarter ended November 30, 1997, the loss before taxes was $177,285
as compared to income before taxes of $128,937 in the quarter ended
November 30, 1996. The loss before taxes resulted primarily from the loss
from operations. The net loss was $111,367 for the quarter ended November
30, 1997, as compared to net income of $89,988 in the quarter ended
November 30, 1996. The net loss per common share was $0.01 in the current
quarter. Income per common share was $0.00 in the quarter ended November
30, 1996.
Results For Nine Months Ended November 30, 1997 As Compared With Nine
Months Ended November 30, 1996:
In the nine months ended November 30, 1997 income from operations was
$253,428 as compared to income from operations of $242,882 in the nine
months ended November 30, 1996. The increase in operating income resulted
primarily from the sale of Gamogen's impotence oral treatment, as reflected
in sales of impotence technology of $708,000 (offset in part by related
Gamogen general and administrative expenses of $55,660) and decreased
research and development expense versus the same nine month period of the
prior fiscal year. Research and development expenses, in the nine month
period ended November 30, 1997, were reduced by $93,030 in payments
received for costs related to the new OEM medical suction device. The
increase in operating income was limited by the $935,343 decline in sales
of OEM products to Osbon (see above), increased manufacturing costs,
primarily in the quarters ended November 1997 and August 1997,
related to the development and production startup of both the OEM medical
suction device and the Freedom60 Syringe I.V. Infusion System, and
increased depreciation and amortization expense related to the Chester
facility. Total product sales for the nine months ended November 30, 1997
were $1,195,819, down $929,454 as compared to product sales of $2,125,273
for the nine months ended November 30, 1996. The decline in product sales
results primarily from lower sales of OEM products to Osbon. Repro-Med sales of
OEM products to Osbon in the nine month period ended November 30, 1997
were $460,556. Repro-Med sales of OEM products to Osbon in the nine month
period ended November 30, 1996 were $1,395,899. The nine month decline in
in sales was limited by new products revenues as reflected in sales of the
Freedom60 Syringe I.V. Infusion System and the OEM medical suction device
of $61,376 and $19,140, respectively. The decline in sales of OEM products to
Osbon and the increased manufacturing costs related to the development and
production startup of both the OEM medical suction device and the Freedom60
Syringe I.V. Infusion System are reflected in the decline in product sales
margins on cost of goods sold to $600,282 or 50% of product sales in the nine
months ended November 1997 as compared to $1,230,598 or 58% of sales in the
nine months ended November 1996.
In the nine month period ended November 30, 1997 income before taxes was
$2,759 as compared to income before taxes of $373,017 in the nine month
period ended November 30, 1996, a decline of $370,258. The decline in
income before taxes resulted primarily from the $935,343 decrease in sales
of OEM products to Osbon and increased manufacturing costs related to the
development and production startup of the OEM medical suction device and
the Freedom60 Syringe I.V. Infusion System (see above). The decline in net
income before taxes was limited by Gamogen's sales of impotence technology
of $708,000 (less related expenses which include $55,660 in general and
administrative expenses and $75,000 in licensing maintenance credits and
minority interest charges of $181,787 which result from the impotence
technology sale).
Net income for the nine month period ended November 30, 1997 was $84,702.
This compares with net income of $232,946 for the same nine month period of
the previous fiscal year. Net income per common share for the nine month
period ended November 30, 1997 was $0.00. This compares with net income per
common share of $0.01 for the same nine month period of the previous fiscal
year.
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 following persons, thereunto duly authorized.
REPRO-MED SYSTEMS, INC.
/s/ Andrew I. Sealfon January 11, 1998
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board, Director, and Chief Executive Officer
/s/ Jesse A. Garringer January 11, 1998
Jesse A. Garringer, Executive Vice-President, General
Manager,
Secretary, Director, and Chief Financial Officer