10-Q 1 d80423e10-q.txt FORM 10-Q FOR QUARTER ENDED JULY 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 31, 1997. [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1943 for the transition period from ___________ to ___________. 1-9087 (Commission file no.) SUMMA RX LABORATORIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-1535372 (State or other jurisdiction (IRS employer of incorporation or organization) identification no.) 2940 FM 3028, Mineral Wells, Texas 76067 (Address of principal executive office) (Zip Code) (817) 325-0771 (Registrant's telephone number, including area code) 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 Act of 1934 during the preceding 12 months (or for a 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 [ ] As of July 31, 1997 there were 3,597,401 shares of common stock outstanding. 2 SUMMA RX LABORATORIES, INC. AND SUBSIDIARY TABLE OF CONTENTS FORM 10-Q PART I - FINANCIAL INFORMATION 3 Item 1 - Financial Statements 3 Consolidated Balance Sheet 3 Consolidated Statement of Operations 4 Consolidated Statement of Cash Flows 5 Supplemental Notes to the Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION 9 Item 1 - Legal Proceedings 9 Item 2 - Changes in Securities 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 SIGNATURES 9

2 3 SUMMA RX LABORATORIES, INC. BALANCE SHEET (Unaudited)

See supplemental notes to the consolidated financial statements. 3 4 SUMMA RX LABORATORIES, INC. STATEMENT OF OPERATIONS (Unaudited)

See supplemental notes to the consolidated financial statements. 4 5 SUMMA RX LABORATORIES, INC. STATEMENT OF CASH FLOWS (Unaudited)

See supplemental notes to the consolidated financial statements. 5 6 SUPPLEMENTAL NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The unaudited interim consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited interim financial statements and related notes should be read in conjunction with the financial statements notes thereto included in the Corporation's most recent Form 10-K covering fiscal year ended April 30, 1997. The information furnished reflects, in the opinion of the management of Summa Rx Laboratories, Inc. all adjustments necessary for a fair presentation of the financial results for the interim period presented. Interim results are subject to year-end adjustments and audit by independent certified public accountants. There were 2,000,000 shares of $0.10 par value preferred stock authorized and 50,000 shares issued and outstanding at July 31, 1997 and 50,000 shares issued and outstanding at April 30, 1997. There were 10,000,000 shares of $.01 par value common stock authorized and 3,597,401 shares issued and outstanding at July 31, 1997 and 3,597,401 shares issued and outstanding at April 30, 1997. 6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS A wholesale prescription drug supplier was acquired as a new customer during the first quarter of fiscal year 1995. The acquisition of this customer will improve the seasonality of sales which generally experiences lower sales during the first two fiscal quarters. Sales for the first quarter increased 8% when compared to the first quarter of last year.

Cost of goods can fluctuate dramatically due to the nature of our business, contract manufacturing. Management strives to maintain cost of goods between 70% to 75% of sales. Cost of goods sold decreased from 80% to 74% when comparing the first quarter of this year with the same period last year.

The dollar value of general and administrative expenses have remained constant due to management's diligence to control expenses. Selling, expenses remain constant due to the nature of our business, contract manufacturing, the only fluctuation directly associated with sales are commissions. Overall the percentage will decrease as sales increase due to general and administrative expenses being a specific value. Selling, general and administrative expenses decreased from 24% of sales to 18% of sales for the comparable period last year.

Interest expense was primarily on loans from stockholders. 7 8 FINANCIAL CONDITION The Company's debt structure has significantly improved, the debt to related parties has been accruing interest, but not consuming cash in debt service. The Company has exchanged all but 50,000 shares of the preferred stock and the accumulated dividends , on these preferred shares to common stock. These shares and the accumulated dividends are convertible to 51,973 shares of common stock, the remaining shareholder has indicated his intent to convert. The Company exchanged $185,000 of Convertible Debentures, and its accrued interest of $98,405 for 566,810 shares of common stock during the first quarter of fiscal 1997, an additional 75,000 shares of common stock were sold to generate cash to retire the remaining debenture and its accrued interest. In July, the company issued twelve percent (12%) subordinated callable notes in the amount of $190,000 due July 10, 1999. The funds were generated and set aside for capital expenditures. A new IMA Model 40F intermittent motion capsule filling machine was purchased to meet the growing demand of customers wanting encapsulated products as opposed to compressed tablets. A new air compressor has been ordered to meet the demand of compressed air needed to run the new capsule machine and automated packaging line simultaneously. 8 9 PART II -- OTHER INFORMATION Item 1 - Legal Proceedings Not applicable Item 2 - Changes in Securities Not applicable Item 3 - Defaults Upon Senior Securities Not applicable Item 4 - Submission of Matters to a Vote of Security Holders Not applicable Item 5 - Other information Not applicable Item 6 - Exhibits and Reports on Form 8-K None SIGNATURES Pursuant to the requirements 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. Summa Rx Laboratories, Inc. September 13, 1997 /s/ Pauline G. Lee Pauline G. Lee Secretary and Chief Accounting Officer 9 10 INDEX TO EXHIBITS

SUMMA RX LABORATORIES INC 10-Q