What do you know about SPSU that I don't? Did you read its latest 10-Q?
It's up about 9 cents today, so something must be up! What is it?
Good Luck, sweet Susie!
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November 8, 1999
SUPERIOR SUPPLEMENTS INC (SPSU)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
This report on Form 10-QSB contains certain forward looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 with respect to the financial condition, results of operations and business of the Company. All of these
forward looking statements, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not
be placed upon such estimates and statements.
Results of Operations
The Company has incurred a net loss of $435,000 from operations for the three month period ended September 30, 1999. In
addition, the Company has a working capital deficit of $869,000 at September 30, 1999. These factors raise substantial doubt
about the company's ability to continue as a going concern.
Net sales for the three month period ended September 30, 1999 were approximately $1,148,000, as compared to
$1,729,000 in the corresponding period in the prior year. The Company has realized a decline in sales to customers which
outsource a portion of their business to supplement their own capacities. Efforts are being made to replace these revenues.
Cost of sales for the three months ended September 30, 1999 reflects fixed overhead costs and increased direct labor rates as
a result of lower production volume due to the decline in sales.
Selling, general and administrative expenses approximated $187,000 and $123,000 for the three month periods ended
September 30, 1999 and 1998, respectively. As a percentage of sales, these amounts represent 16% and 7% respectively.
The Company is operating under a supply agreement with PDK Labs Inc., ("PDK"), which expires in May 2000 and provides
for the Company to supply PDK with vitamins and dietary supplements in bulk tablet form. The agreement, as amended,
provides for PDK to purchase certain products at specified prices. PDK agreed to purchase products having a minimum
aggregate sales price of $2,500,000 per year during the term of the agreement. In the event that PDK fails to purchase the
minimum amount of products in any year, the Company will be paid up to $100,000 on a pro-rated basis as liquidated
damages. Sales to PDK approximated $756,000 and $1,620,000 for the three months ended September 30,1999 and 1998,
respectively.
The Company also operates under a packaging agreement with PDK, which provides for the Company to package certain
products for PDK. The agreement expires in November 1999 and provides for a minimum annual packaging amount of
1,000,000 bottles. In the event that PDK fails to purchase the minimum annual packaging amount, the Company will be paid up
to $100,000 on a pro-rata basis, as liquidated damages. As of September 30, 1999 the Company packaged approximately
1,032,000 bottles for PDK.
SUPERIOR SUPPLEMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company is also obligated under a management agreement with PDK, which provides for PDK to supply the Company
with certain management services in consideration for the payment by the Company of a management fee of $10,000 per
month.
The Company recognizes the need to ensure its operations will not be adversely impacted by Year 2000 software failures.
Software failures due to processing errors potentially arising from calculations using the Year 2000 date are a known risk. The
Company is addressing this risk to the availability and integrity of financial systems and the reliability of operational systems. The
Company has developed a plan to ensure that its systems are compliant with the requirements to process transactions in the
Year 2000. The plan consists of four phases: assessment, remediation, testing and implementation, and encompasses internal
information technology (IT) systems and non-IT systems, as well as third party exposures. The Company has completed the
assessment of IT systems and non-IT systems and satisfactorily tested and implemented remedial changes to its existing
software. In addition, the Company has requested from a majority of its principal suppliers and vendors written statements
regarding their plan for meeting Year 2000 requirements. To date, the Company has not received adequate response to such
requests.
Liquidity and Capital Resources
As of September 30, 1999 the Company had a working capital deficit of approximately $(869,000).
The Company's statement of cash flows reflects cash used in operating activities of approximately ($23,000), primarily due to
(i) decreases in operating assets such as due from affiliate ($267,000), and inventories ($315,000), (ii) a decrease in accounts
payable and accrued expenses ($73,000), and due to affiliate ($169,000), (iii) an adjustment for depreciation and amortization
($62,000), offset by (iv) a net loss of $435,000.
The Company frequently has not been able to make timely payments to its trade creditors. Deferred payment terms have been
negotiated with most vendors. No customer orders have been canceled to date. However, if significant volumes of orders were
to be canceled, the Company's ability to continue to operate would be jeopardized.>>> |
