UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
ACT OF 1934
For the quarterly period ended MAY 31, 2004
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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, 2004
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Common stock, $.01 par value 24,931,000 shares
REPRO-MED SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet (Unaudited) - May 31, 2004 ........................... 3
Statements of Operations (Unaudited) - for the Three-Months
Ending May 31, 2004 and May 31, 2003 ............................... 4
Statements of Cash Flow (Unaudited) - for the Three-Months
Ending May 31, 2004 and 2003 ....................................... 5
Notes to Unaudited Financial Statements ............................ 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...................... 6
PART II - OTHER INFORMATION
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
MAY 31, FEBRUARY 29,
2004 2004
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ASSETS
CURRENT ASSETS
Cash & Cash Equivalents ...................... $ 221,716 $ 219,682
Accounts Receivable, net ..................... 208,310 130,334
Inventory .................................... 350,234 378,982
Prepaid Expenses ............................. 31,052 25,775
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TOTAL CURRENT ASSETS ............................. 811,312 754,773
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EQUIPMENT & OTHER ASSETS
Total Equipment .............................. 1,226,741 1,216,152
Less - Accumulated Depreciation .............. (877,306) (858,417)
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Net Book Value of Equipment .................. 349,435 357,735
Deposits ..................................... 27,652 27,652
Other Assets ................................. 46,372 48,027
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TOTAL EQUIPMENT & OTHER ASSETS ................... 423,459 433,414
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TOTAL ASSETS ..................................... $ 1,234,771 $ 1,188,187
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................. $ 269,431 $ 325,723
Note Payable to Related Parties .............. 7,000 7,000
Accrued Expenses ............................. 92,571 99,205
Note Payable to Bank ......................... 198,581 198,581
Current Portion Capital Lease Obligations .... 17,228 19,079
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TOTAL CURRENT LIABILITIES .................... 584,811 649,588
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OTHER LIABILITIES
Long-Term Portion Capital Lease Obligations .. 20,785 24,846
Deferred Capital Gain Income ................. 331,596 337,215
Long-Term Debt - Notes Payable ............... 450,000 350,000
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TOTAL LIABILITIES ................................ 1,387,192 1,361,649
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STOCKHOLDERS' EQUITY
Preferred Stock, 8% Cumulative $.01 Par Value
Authorized 2,000,000 Shares, Issued &
Outstanding 10,000 Shares (liquidation value
$100,000) .................................. 100 100
Common Stock, $.01 Par Value, Authorized
50,000,000 Shares, 24,931,000 shares and
24,531,000 shares issued and outstanding at
May 31, 2004 and February 29, 2004,
respectively ............................... 249,310 245,310
Additional Paid-in Capital ................... 2,268,711 2,252,711
Accumulated Deficit .......................... (2,528,542) (2,529,583)
Treasury Stock at Cost ....................... (142,000) (142,000)
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TOTAL STOCKHOLDERS' EQUITY ....................... (152,421) (173,462)
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ......... $ 1,234,771 $ 1,188,187
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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, 2004 MAY 31, 2003
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SALES
Net Sales ...................................... $ 507,475 $ 429,501
COST AND EXPENSES
Cost of Goods Sold ........................... 219,800 198,645
Selling, General & Administrative Expenses ... 224,207 221,939
Research and Development ..................... 10,443 8,680
Stock-Based Compensation ..................... 20,000 -
Depreciation and Amortization ................ 20,544 19,734
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TOTAL COST AND EXPENSES ........................ 494,994 448,998
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PROFIT (LOSS) FROM OPERATIONS .................. 12,481 (19,497)
Non-Operating Income (Expense)
Interest (Expense) ........................... (11,842) (8,797)
Interest & Other Income ...................... 402 237
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(11,440) (8,560)
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INCOME (LOSS) BEFORE INCOME TAXES .............. 1,041 (28,057)
Provision for Income Taxes ................... - (831)
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INCOME (LOSS) AFTER TAXES ...................... $ 1,041 $ (28,888)
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INCOME (LOSS) PER COMMON SHARE
Basic ........................................ $ 0.01 $ (0.01)
Diluted ...................................... $ 0.01 $ (0.01)
Average Common Shares Outstanding ............ 24,767,888 23,504,000
See Accompanying Notes to Financial Statements
4
REPRO-MED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE THREE MONTHS ENDED
MAY 31, MAY 31,
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ................................. $ 1,041 $(28,888)
Adjustments to reconcile net (loss) to cash
used in operating activities:
Stock-Based Compensation ...................... 20,000 -
Depreciation and Amortization ................. 20,544 19,734
Capital Gain - building lease ................. (5,619) (5,620)
Increase in Accounts Receivable ............... (77,976) (6,567)
Decrease in Inventories ....................... 28,748 20,782
Increase in Prepaid Expenses .................. (5,277) (8,224)
Decrease in Accounts Payable .................. (56,292) (10,033)
Decrease (Increase) in Accrued Expenses ....... (6,634) 6,863
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NET CASH USED IN OPERATIONS ....................... (81,465) (11,953)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Security Deposit .................. - 23,500
Capital Expenditures .......................... (10,589) (2,468)
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NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (10,589) 21,032
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CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Notes Payable - President and Others ............ 100,000 -
Increase in Notes Payable to Related Parties .... - 36,000
Payments, Increased Obligations on Capitalized
Leases ........................................ (5,912) (9,012)
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NET CASH PROVIDED BY FINANCING ACTIVITIES ...... 94,088 26,988
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NET INCREASE IN CASH .............................. 2,034 36,067
Cash and Cash Equivalents -- Beginning of Period .. 219,682 16,738
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Cash and Cash Equivalents -- End of Period ........ $ 221,716 $ 52,805
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Supplemental disclosures of Cash Flow Information:
Interest ...................................... $ 11,842 $ 8,797
Income Taxes .................................. - 831
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 29, 2004 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, 2004, and the results of operations and cash flows for
the three-month periods ended May 31, 2004 and 2003 have been included.
The results of operations for the three-month period ended May 31, 2004, 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 29, 2004.
STOCK HOLDERS' EQUITY/NOTES PAYABLE
During the quarter ended May 31, 2004, the company executed note agreements for
$100,000. In connection with the execution of those agreements, the Company is
obligated to issue four shares of its common stock each year for each dollar of
principal borrowed. As of May 31, 2004, the Company is obligated to issue
400,000 shares it common stock under the agreements. These shares have not been
issued as of May 31, 2004, but have been reflected as issued for financial
statement purposes.
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, 2004 AND 2003
Sales for the first quarter increased 18.2% to $507,475 compared to $429,501 in
2003. Sales in our core product lines increased 26.8% quarter over quarter ended
May 31, 2004, with FREEDOM60 sales increasing by 37.7% and RES-Q-VAC sales
increasing by 24.3%. Sales of non-core products and OEM manufacturing revenues
decreased $21,832 (34.3%). Approximately two-thirds of the increased revenues
came from international markets.
Gross profit increased to 56.7% of net sales in 2004 from 53.8% in 2003 due, in
part, to efficiencies realized at the higher sales volume.
Selling, general and administrative expense increased 1% ($2,268) to $224,207 in
2004 from $221,939 in 2003.
Research and development expenses increased $1,763 from 2003 to 2004.
Depreciation and amortization expense increased slightly ($810) period over
period as the result of equipment purchases during the past year.
Interest expense increased 34.6% as a result of an increase in loans obtained
through the company's promissory note program.
As a result of the higher sales volume and continued efforts to improve
efficiencies, the Profit from Operations improved by $31,978 from a loss of
$19,497 in the quarter ended May 31, 2003 to a positive profit of $12,481,
including $20,000 in non-cash expenses related to issuance of stock in 2004
under our promissory note and stock offering program. Net profit improved from a
loss of $28,888 in 2003 to a positive profit of $1,041 in 2004, with the 2004
results again including non-cash expenditures of $20,000 in stock-based
compensation.
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. As of May 31, 2004,
$198,581 has been advanced on the line of credit. In accordance with the
agreement, the line of credit was to be renewed or paid off by June 30, 2001. We
have received a verbal continuance from the bank through June 30, 2003. We have
not received a demand for repayment of the loan and continue to make interest
payments.
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Commencing in mid-February, 2004, we started raising capital from a promissory
note and stock offering which raised $225,000 by the end of the fiscal year
ended February 29, 2004. This five year promissory note pays 2% over prime plus
four share of common stock per year for every year the loan is in place. We
received an additional $100,000 under the same program in the first quarter of
fiscal year 2005. Another $25,000 was raised in the first quarter of 2003 under
similar terms.
We continue to work towards improving cash flow and have several opportunities
to improve sales of our key products, RES-Q-VAC and FREEDOM60. We have expanded
our sales efforts in several areas.
Effective March, 2004, we engaged the services of a retired United States Air
Force Colonel to guide our RES-Q-VAC military sales efforts. In May, we hired an
experienced Vice President of Sales, based in Florida, to handle sales in the
southeastern United States and manage key accounts elsewhere in the country. In
June, we engaged a marketing consultant with extensive infusion sales experience
to assist in developing additional markets for the FREEDOM60.
In May, 2004, we signed a distribution agreement with Omni Biomed LLC, based in
Knoxville, Tennessee. Omni Biomed provides distribution and training services to
hospitals, physicians, clinics and others in the home and long-term care
markets. The agreement covers both the FREEDOM60 and RES-Q-VAC for the
southeastern United States including Tennessee, Kentucky, Alabama, Arkansas,
North Carolina, South Carolina, Mississippi, Louisiana, West Virginia, Virginia,
Georgia, and Florida.
Our distributor in Europe, Gama Sanitos, is actively engaged in establishing the
Freedom60 as the device of choice for the treatment of post operative pain
control throughout Europe. We continue to explore the potential of this
application in the domestic market. Gama Sanitos is also jointly developing
several new products with us which will enhance the marketability of the
FREEDOM60. Currently we are looking at developing an elastomeric pump which can
be used for antibiotics, pain, and KVO (Keep Vein Open) therapy. We believe that
for certain applications requiring more fluid volume than 60ml, and for KVO
therapy combined with the FREEDOM60, an elastomeric pump will make our infusion
products line more diverse and improve sales.
We continue to pursue capital investment through debt or equity to increase our
marketing and sales, and to enhance our existing products as well as new line
additions.
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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, 2004.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K, Item 9, Regulation FD Disclosure, incorporated by reference dated May
12, 2004.
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 20, 2004
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
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