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 August 31, 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 August 31, 1999 - ---------------------------- ------------------------------ Common stock, $.01 par value 22,142,000 shares REPRO-MED SYSTEMS, INC. TABLE OF CONTENTS PART I PAGE ---- Item 1. Financial Statements Balance Sheets - August 31, 1999 and 3 February 28, 1999. Statements of Income - For the three month and six 4 month periods ended August 31, 1999 and August 31, 1998. Statements of Cash Flow - August 31, 1999 and 5 August 31, 1998. Item 2. Management's Discussion and Analysis of Financial 6 Condition and Results of Operations. PART II Item 1. Legal Proceedings 9 None Item 2. Changes in Securities 9 None Item 3. Defaults Upon Senior Securities 9 None Item 4. Submission of Matters to a Vote of Security Holders 9 None Item 5. Other Information 9 None Item 6. Exhibits and Reports on Form 8-K 9 None 2 PART I. ITEM 1 - FINANCIAL STATEMENTS REPRO-MED SYSTEMS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS 8-31-99 2-28-99 ----------- ----------- CURRENT ASSETS Cash $ 218,186 $ 683,321 Short-term Investments 249,884 81,352 Accounts Receivable, net 149,253 120,470 Inventory 649,634 573,560 Prepaid Expenses 68,042 78,785 Deposits 190,000 190,000 ----------- ----------- TOTAL CURRENT ASSETS $ 1,524,999 $ 1,727,488 ----------- ----------- PROPERTY, PLANT & EQUIPMENT-NET 504,144 522,660 OTHER ASSETS 63,242 68,484 ----------- ----------- TOTAL ASSETS $ 2,092,385 $ 2,318,632 ----------- ----------- CURRENT LIABILITIES Accounts Payable $ 90,220 $ 41,250 Current Portion Long Term Debt 55,580 55,580 Bank Line of Credit Payable 358,364 439,372 Other Current Liabilities 535,859 344,818 ----------- ----------- TOTAL CURRENT LIABILITIES $ 1,040,023 $ 881,020 ----------- ----------- Other Liabilities 415,896 427,136 Long Term Debt 157,536 184,926 ----------- ----------- TOTAL LIABILITIES 1,613,455 1,493,082 ----------- ----------- Minority Interest in Subsidiary 234,340 288,882 STOCKHOLDERS' EQUITY Preferred Stock, 8% Cumulative $.01 Par Value Authorized 2,000,000, issued & Outstanding10,000 Shares 100 100 Common Stock, $.01 Par Value, Authorized 50,000,000 Shares, Issued & Outstanding 22,142,000 221,420 221,420 Warrants Outstanding 140 140 Additional Paid-In Capital 3,040,662 3,040,662 Accumulated Deficit (2,875,732) (2,583,654) Treasury Stock at Cost (142,000) (142,000) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 244,590 536,668 ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,092,385 $ 2,318,632 ----------- ----------- 3 REPRO-MED SYSTEMS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
FOR 3 MONTH ENDED FOR 6 MONTH END ------------------------ ------------------------- 8-31-99 3-31-98 8-31-99 8-31-98 ------------------------ ------------------------- SALES Net Sales of Products $397,663 $371,230 $924,939 $1,071,548 COST AND EXPENSES Cost of Goods Sold 292,765 288,125 596,212 621,924 Selling, General & Administrative 244,969 292,040 541,310 575,954 Research & Development 24,872 24,440 58,684 83,115 Depreciation & Amortization 30,627 39,380 53,603 78,760 --------- --------- --------- ---------- Total Expenses 593,233 643,985 1,249,809 1,359,753 --------- --------- --------- ---------- INCOME (LOSS FROM OPERATIONS (195,570) (272,755) (324,870) (288,205) Non-Operating Income (Expense) Rental Income 0 21,525 0 43,050 Interest Expense (11,009) (33,673) (21,225) (62,887) Interest & Other Income 1,826 68,953 4,995 85,821 --------- --------- --------- ---------- (9,183) 56,805 (16,230) 65,984 Minority Interest In Loss of Subsidiary 61,155 19,413 54,542 39,979 (LOSS)BEFORE TAXES (143,598) (196,537) (286,558) (182,242) (Provision) Benefit for Income Taxes (760) 49,123 (1,520) 48,623 --------- --------- --------- ---------- NET INCOME (LOSS) (144,358) (147,414) (288,078) (133,619) --------- --------- --------- ---------- EARNINGS (LOSS PER COMMON SHARE Primary ($0.01) ($0.01) ($0.01) ($0.01) Fully Diluted ($0.01) ($0.01) ($0.01) ($0.01)
4 REPRO-MED SYSTEMS, INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS FOR 6 MONTH ENDED -------------------------- 8-31-99 8-31-98 ---------- ---------- NET INCOME (LOSS) $(288,078) $(133,619) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS: Income (Loss) in Minority Interest (54,542) (39,979) Depreciation & amortization 53,603 78,760 Decrease (Increase) in Short Term Investments (168,532) 279,776 Decrease (increase) in Accounts Receivable (28,783) (6,982) Decrease (Increase) in inventory (76,074) (118,483) Decrease (Increase) in Prepaid Expenses 10, 743 (1,211) Decrease (Increase) in Deferred Taxes 0 (49,373) Decrease (Increase) in Accounts Payable 48,970 (56,415) Decrease (Increase) other Liabilities 179,801 (63,188) --------- --------- NET CASH PROVIDED BY OPERATIONS (322,892) (110,714) --------- --------- CASH FLOW FROM INVESTING ACTIVITY Acquisition of Property and Equipment (29,845) (32,533) Acquisition of Other Assets 0 (245) --------- --------- Net Cash Used in Investing Activities (29,845) (32,778) --------- --------- NET CASH FLOW FROM FINANCING Activities Proceeds (Repayment) from Bank Notes Payable (108,398) 120,000 Repayment of Mortgage 0 41,910) Preferred Stock Dividend (4,000) (4,000) --------- --------- Net Cash Used in Financing Activities (112,398) 74,090 --------- --------- NET INCREASE (DECREASE) IN CASH (465,135) (69,402) Cash and Equivalents beginning Of Period 683,321 160,567 --------- --------- CASH AND EQUIVALENTS END OF PERIOD $ 218,186 $ 91,165 --------- --------- SUPPLEMENTARY DATA Interest Paid $ 21,225 $ 62,887 Taxes Paid 0 0 5 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). 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. Management's Discussion and Analysis of Financial Condition and Results of Operations. Three months ended August 31, 1999 vs. 1998 Sales increased +7% from $371,230 to $397,663 for the quarter ended August 31,1999 versus 1998. The increase is attributed to sales of the Company's new intravenous infusion products. Cost of goods rose moderately + 1.6% with the sales increase improving the product margin from 22% in 1998 to 26% in 1999. Selling, general and administrative expense decreased $47,071 for the three months period versus 1998. Management initiated expense and payroll reductions that resulted in the savings. Research and development expense are virtually unchanged period to period. 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. 6 Interest expense was reduced -67% as the result of the sale and lease-back of the company's building. Interest expense is now replaced by rent payments. Interest and other income decreased by -97% with the elimination of rental income upon sale of the building. The loss from operations was lowered 27% with margins improving +$21,793, SG&A reductions of $47,071 and lower depreciation $8,753 accounting for the gain. Six Months ended August 31, 1999 vs. 1998 Sales decreased $146,609 (14%) primarily because the Company's OEM (Original Equipment Manufacture) sales in 1998 have not been repeated to the same levels in 1999 and the sales of new products have not yet compensated for that shortfall. Cost of goods sold were 64% for the first six months of 1999 versus 58% for the comparable period in 1998. The lower margins reflect the price structure for the new products that have yet to meet the Company's objective of +50%. Selling, General and Administrative expenses were 6% lower for the comparable period as management did initiate expense and payroll reductions in the second quarter. Research and Development expenses were 29% 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 $82,214. The loss before taxes increased $104,316 as savings in operating expenses $84,232 were impacted by lower gross margin of -$120,897 and reduced non-operating income of -$82,214. The minority interest in subsidiary loss increased $14,563. Liquid and Capital Resources For the first six months of fiscal 2000, through August 31, 1999, the company experienced negative cash flow of approximately $300,000 as a result of declining sales and significant expenses to prepare new products for the market. In August/September management initiated expense and payroll reductions that are expected to reduce negative cash flow below $20,000 per month if sales achieve minimum expectations or to a cash breakeven with increased volume. 7 The Company did sign with its lender on July 27, 1999 a Forebearance Agreement that extended the maturity date for the line of credit to January 31, 2000 and precluded the issuance of new advances. The Company continues to attempt to refinance the indebtedness before January 31, 2000. If new financing is not arranged the Company will attempt to negotiate an extension of the forebearance agreement or other arrangement with the lender. The funds available on August 31, 1999 are expected to meet cash requirements as planned under current operating conditions for the remainder of the fiscal year. 8 FORWARD LOOKING STATEMENTS The Company has made and will make certain forward-looking statements in the Quarterly Report relating to market and product development among others. These Forward-looking statements represent challenging goals for the Company and are based on certain assumptions and estimates including the Worldwide economy, competitive activity, funding availability, product introductions, governmental action and the development of certain markets. Some examples of key factors necessary to achieve the Company's goals are: (1) the ability to continue successful technological innovation (2) the avoidance of adverse cost increases (3) the ability to achieve projected sales of the Company's products (4) uncertainty related to Food and Drug Administration or other government regulation (5) introduction by other companies of competitive products (6) changes in the Company's relationships with its customers and distributors and (7) adequate and available sources of funds. If the Company's assumptions and estimates are incorrect or do not come to fruition, or if the Company does not achieve all of these key factors, then the Company's actual performance could vary materially from the forward-looking statements made herein. 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 August 31, 1999. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 9 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 Andrew I. Sealfon, President October 14, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been and on the date indicated. /s/ Andrew I. Sealfon October 14, 1999 - ---------------------------------------- Andrew I. Sealfon, President, Treasurer, Chairman of the Board, Director, and Chief Executive Officer 10