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 NOVEMBER 30, 1999 ----------------- 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, NY 10918 ------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 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 November 30, 1999 ----- -------------------------------- Common stock, $.01 par value 22,142,000 shares -1- REPRO-MED SYSTEMS, INC. TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. Financial Statements Balance Sheets - November 30, 1999 and 3 February 28, 1999 Statements of Income - For the three months and nine months periods ended November 30, 1999 and November 30, 1998 4 Statements of Cash Flow - November 30,1999 and 1998 5 Notes to 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 None ITEM 2. Changes in Securities 8 None ITEM 3. Defaults Upon Senior Securities 8 None ITEM 4. Submission of Matters to a Vote of Security Holders 8 None ITEM 5. Other Information 8 None ITEM 6. Exhibits and Reports on Form 8-K 8 None
-2- PART I. ITEM 1 - FINANCIAL STATEMENTS REPRO-MED SYSTEMS, INC. BALANCE SHEETS
11-30-99 2-28-99 -------- ------- CURRENT ASSETS Cash $182,162 $683,321 Short-term Investments 0 81,352 Accounts Receivable, net 278,178 120,470 Inventory 493,744 573,560 Prepaid Expenses 44,661 78,785 Deposits 40,000 190,000 ---------- ---------- TOTAL CURRENT ASSETS 1,038,745 1,727,488 ---------- ---------- PROPERTY & EQUIPMENT-NET 495,340 522,660 OTHER ASSETS 61,647 68,484 ---------- ---------- TOTAL ASSETS $1,595,732 $2,318,632 ---------- ---------- CURRENT LIABILITIES Accounts Payable $110,861 $41,250 Current Portion Long Term Debt 0 55,580 Bank Line of Credit Payable 0 439,372 Accrued Expenses 77,139 75,727 Current Portion Capital Gain 22,481 22,481 Customer Deposits 473,418 246,610 ---------- ---------- TOTAL CURRENT LIABILITIES 683,899 881,020 ---------- ---------- DEFERRED CAPITAL GAIN 410,276 427,136 LONG TERM DEBt 0 184,926 ---------- ---------- TOTAL LIABILITIES 1,094,175 1,493,082 ---------- --------- MINORITY INTEREST IN SUBSIDIARY 0 288,882 STOCKHOLDERS' EQUITY Preferred Stock, 8% Cumulative $.01 Par Value Authorized 2,000,000, issued & Outstanding 10,000 Shares 100 100 Common Stock, $.01 Par Value, Authorized 50,000,000 Shares, Issued & Outstanding 22,142,000 221,420 221,420 Warrants Outstanding 100 140 Additional Paid-In Capital 3,040,662 3,040,662 Accumulated Deficit (2,618,725) (2,583,654) Treasury Stock at Cost (142,000) (142,000) ---------- --------- TOTAL STOCKHOLDERS' EQUITY 501,557 536,668 ---------- --------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,595,732 $2,318,632 ---------- ----------
-3- REPRO-MED SYSTEMS, INC. STATEMENTS OF INCOME
FOR 3 MONTHS ENDED FOR 9 MONTHS ENDED ------------------ ------------------ 11-30-99 11-30-98 11-30-99 11 30-98 -------- -------- -------- -------- SALES Net Sales of Products $524,445 $312,103 $1,449,384 $1,383,651 COST AND EXPENSES Cost of Goods Sold 303,920 237,204 900,132 859,127 Selling, General & Administrative 203,408 209,823 744,718 785,777 Research & Development 25,248 56,771 83,932 139,886 Depreciation & Amortization 22,545 31,880 76,148 110,640 -------- --------- ---------- ---------- Total Expenses 555,121 535,678 1,804,930 1,895,430 -------- --------- ---------- ---------- (LOSS) FROM OPERATIONS (30,676) (223,575) (355,546) (511,779) Non-Operating Income (Expense) Rental Income 0 21,525 0 64,575 Interest Expense (9,858) (35,791) (31,083) (98,678) Interest & Other Income 5,021 2,659 10,016 88,479 Gain on Sale of Investment 221,800 0 221,800 0 -------- --------- ---------- ---------- 216,963 (11,607) 200,733 54,376 -------- --------- ---------- ---------- INCOME (LOSS) BEFORE TAXES 186,287 (235,182) (154,813) (457,403) (Provision) Benefit for Income Taxes (760) 39,119 (2,280) 87,742 -------- --------- ---------- ---------- NET INCOME (LOSS) BEFORE MINORITY INTEREST & EXTRAORDINARY ITEM 185,527 (196,063) (157,093) (369,661) Minority Interest 0 56,243 54,542 96,222 Extraordinary Item 71,480 0 71,480 0 -------- --------- ---------- ---------- NET INCOME (LOSS) $257,007 ($139,820) ($31,071) ($273,439) -------- --------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Primary 22,142,000 22,142,000 22,142,000 22,142,000 Fully Diluted 25,967,158 25,581,762 25,967,158 25,581,762 EARNINGS (LOSS) PER COMMON SHARE Primary-Before Extraordinary Item $0.01 ($0.01) ($0.00) ($0.02) Fully Diluted Before Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01) Primary-Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01) Fully Diluted-Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01)
-4- REPRO-MED SYSTEMS, INC STATEMENTS OF CASH FLOWS
FOR 9 MONTHS ENDED ------------------ 11-30-99 11-30-98 -------- -------- NET INCOME (LOSS) $ (31,071) $(273,439) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS: Income (Loss) in Minority Interest (54,542) (96,222) Depreciation & Amortization 76,148 110,640 Gain on Sale of Investment (221,800) 0 Gain on Forgiveness of Debt (71,480) 0 Decrease in Short Term Investments 81,352 476,264 Decrease (Increase) in Accounts Receivable (157,708) 81,780 Decrease (Increase) in inventory 79,816 (154,411) Decrease (Increase) in Prepaid Expenses 34,124 (19,491) (Increase) in Deferred Taxes 0 (88,492) (Decrease) Increase in Accounts Payable 69,611 (37,997) (Decrease) in Deferred Capital Gain (16,860) 0 (Decrease) Increase other Liabilities 228,220 (27,013) --------- --------- NET CASH PROVIDED BY OPERATIONS 15,810 (28,381) --------- --------- CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of Investment 263,579 0 Cost of Investment (41,779) 0 Minority Interest (234,340) 0 Acquisition of Equipment (48,828) (38,473) Acquisition of Other Assets 6,837 (445) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (54,531) (38,918) --------- --------- NET CASH FLOW FROM FINANCING ACTIVITIES Proceeds (Repayment) Bank Notes Payable (458,398) 120,000 Repayment of Mortgage 0 (100,671) Decrease in Warrants (40) 0 Preferred Stock Dividend (4,000) (4,000) --------- --------- NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (462,438) 15,329 --------- --------- NET INCREASE (DECREASE) IN CASH (501,159) (51,970) Cash and Equivalents beginning of Period 683,321 160,567 --------- --------- CASH AND EQUIVALENTS END OF PERIOD $ 182,162 $ 108,597 --------- --------- SUPPLEMENTARY DATA Interest Paid $ 29,766 $ 98,678 Taxes Paid 0 0
-5- REPRO-MED SYSTEMS, INC. NOTES TO THE FINANCIAL STATEMENTS 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 dated February 28, 1999. 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 Repro-Med Systems, Inc. that are based on the beliefs of the management of Repro-Med Systems, Inc. as well as assumptions made by and information currently available to the management of Repro-Med Systems, Inc. The Company's 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 the current views of Repro-Med Systems, Inc. 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. 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 NOVEMBER 30, 1999 VS. 1998 - --------------------------------------------- Sales increased 68% from $312,103 (1998) to $524,445 (1999) for the quarters ended November 30. Of the increased revenue, 45% is attributed to intravenous -6- infusion and resuscitation products and 55% to suction and OEM (Original Equipment Manufacture) sales. Cost of goods rose 28% with the sales increase improving the product margin from 24% in 1998 to 42% in 1999. Selling, general and administrative expense decreased 3% for the three months period versus 1998. Management initiated expense and payroll reductions in September 1999 that continue to produce savings compared to prior periods. Research and development expenses are decreased 56% period to period reflecting payroll reductions made in the second quarter of fiscal 2000. The period to period reduction in depreciation and amortization expense reflects the end of write offs for some intangible assets and the elimination of building depreciation with its sale. Interest expense was reduced 72% as the result of the sale and lease-back of the company's building. Interest expense is now replaced by rent payments. Rental income has been eliminated with the sale of the building. Refer to "Liquidity and Capital Resources " below for sale of investment explanation. NINE MONTHS ENDED NOVEMBER 30 1999 VS. 1998 - ------------------------------------------- Sales increased modestly +5% year-to-date November 1999 versus 1998. Five of the Company's eight product lines increased revenues 1999 over 1998. Total OEM sales declined -55% period to period. Cost of goods sold were 62% for both nine months periods. The low margins do not yet reflect the price structure objectives set for the new products at 50%. Selling, General and Administrative expenses were 5% lower for the comparable period as management did initiate expense and payroll reductions in the second quarter. Research and Development expenses were 40% lower for the same reasons. The sale and lease back of the Company's building served to eliminate rental income and debt expense reducing non-operating income and expenses. Refer to "Liquidity and Capital Resources " below for sale of investment explanation. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company did sign a forebearance agreement with its lender on July 27, 1999 that extended the maturity date for the line of credit to January 31, 2000 and precluded the issuance of new advances. Repro-Med Systems, Inc. then negotiated a settlement payment of $350,000 with the lender that was remitted on October 29, 1999. The payment resulted in the recognition of $71,480 in debt forgiveness that is reflected as an extraordinary item on the Statement of Income. As part of the agreement, Repro- -7- Med Systems, Inc. signed a promissory note for $66,000 that becomes due through October 2002 only upon the sale of either of the company's two major product lines. If neither of the two product lines is sold, the note payable terminates. Repro-Med Systems, Inc. concluded the sale of its investment in Gamogen, Inc. on October 31, 1999 effective September 1, 1999. The proceeds form the transaction were $ 263,579. The cost basis for the investment was $41, 779. Consequently, the sale resulted in the recognition of a gain of $221,800 that is reflected in the Statement of Income as "Other Income". As part of the sale, Repro-Med Systems, Inc. purchased income producing assets and assumed certain liabilities from Gamogen, Inc. and its subsidiary Gyneco, Inc. This purchase resulted in Repro-Med Systems, Inc. retaining control and obtaining sole ownership of the operations of Gyneco, Inc. The funds available on November 30, 1999 are expected to meet cash requirements as planned under current operating conditions beyond the end of the current fiscal year. 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 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 November 30, 1999. ITEM 5. OTHER INFORMATION - ------------------------- None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- None -8- 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 January 7, 2000 - --------------------- Andrew I. Sealfon, President, Treasurer, Chairman of the Board, Director, and Chief Executive Officer -9-