Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Internal Fixation Systems, Inc. (1501732) 10-Q published on Aug 20, 2012 at 5:19 pm
Reporting Period: Jun 29, 2012
The Company was notified on August 17, 2012 by an attorney representing Ken West, former director and officer and Laura Cattabriga, former officer that he had received a letter from an attorney claiming to represent a group of shareholders who allegedly suffered damages as a result of the conduct of his clients and that a formal claim would be made in the “very near future.” At this point, there has only been a demand for certain documentation. The Company has put the insurance carrier on notice of a potential claim and has requested additional information from the two former officers regarding this claim. At this time, management cannot determine the potential effect or outcome of such a claim against the Company.
In June 2012, the Company issued 773,993 at $.065 per share for services related to offering fees. Also in June 2012, the Company also converted a note payable due to a related party of $53,750 to 5,375,000 shares of common stock, $150,000 of a line of credit due to a related party to 15,000,000 shares of common stock and $210,000 in accrued salaries and accounts payable were converted to 21,000,000 shares of common stock
Cost of Goods Sold - For the six months ended June 30, 2012, cost of goods sold as a percentage of sales was 30% compared to 26% for the six months ended June 30, 2011. This slight increase was due to the fact that during the period, we sold products that we were selling on consignement and the underlying products cost us more than products that we were manufacturing ourselves or having manufactured for us by other vendors.
Gross Margin – For the six months ended June 30, 2012, gross margin was 70% compared to 74% for the six months ended June 30, 2011. This decrease was due to the fact that we sold products we previously were not selling and these products had a higher cost than products we manufactured or designed and had manufactured for us.
Selling, General and Administrative Expenses - For the six months ended June 30, 2012 selling, general and administrative expense increased 16% to $1,275.283 as compared to $1,103,870 for the six months ended June 30, 2011. For the six months ended June 30, 2012, professional fees and other compensation increased 94% to $801,515 as compared to $412,753 for the six months ended June 30, 2011. For the six months ended June 30, 2012 general and administrative expenses increased 144% to $265,720 as compared to $108,775 for the six months ended June 30, 2011. For the six months ended June 30, 2012 selling expense increased to $97,674 compared to $62,464 for the six months ended June 30, 2011. The increase in selling expense was the result of increased commissions paid to sales representatives as a result of increased sales.
We sublet our manufacturing space and we rent certain manufacturing equipment from a former shareholder. Following a dispute over late fees, in December 2011, the former shareholder caused the power to be turned off in our manufacturing space resulting in damage to machines we use in manufacturing. In December 2011, we filed suit against the former shareholder to recover our damages caused by his turning off the power and the former shareholder counterclaimed against us for eviction and payments under a promissory note and the sublease. This matter is the subject to ongoing litigation before the court and it is doubtful the parties will be able to reach an amicable settlement. We have decided to cease all manufacturing ourselves and to attempt to sell all of the manufacturing equipment. Currently we are selling from existing inventory plus inventory that we are having manufactured for us by outside vendors.