UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
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Commission file number 000-29171
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Med Gen Inc.
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[Exact name of small business issuer as specified in its charter]
Nevada 65-0703559
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(State of incorporation) (IRS Employer Identification No.)
7284 W. Palmetto Park Road, Suite 106, Boca Raton, FL 33433
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(Address of principal executive offices)
(561) 750-1100
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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.
Common Stock, Par Value $.001 per share
4,384,716 Shares outstanding as of December 31, 2000
Transitional Small Business Disclosure Format (check one): Yes___ No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MED GEN, INC.
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CONDENSED BALANCE SHEET
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DECEMBER 31, 2000
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ASSETS
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CURRENT ASSETS
Cash $ 54,723
Accounts receivable, net 217,676
Inventory 79,324
Prepaid expenses 4,913
Officer advances 12,959
Due from related parties 131,014
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Total current assets 500,609
FURNITURE AND EQUIPMENT, net 43,790
INTANGIBLE ASSETS, net 13,036
SECURITY DEPOSITS 80,310
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TOTAL ASSETS $ 637,745
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 393,573
Note payable 45,000
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Total current liabilities 438,573
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
5,000,000 shares authorized, -0-
shares issued and outstanding -
Common stock, $.001 par value
20,000,000 shares authorized,
4,444,716 issued and outstanding 4,445
Additional paid-in capital 1,759,913
Accumulated deficit (1,565,186)
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Total stockholders' equity 199,172
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 637,745
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Read the accompanying notes to the financial statements.
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MED GEN, INC.
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CONDENSED STATEMENTS OF OPERATIONS
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FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
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2000 1999
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NET SALES $ 405,158 $ 507,416
COST OF GOODS SOLD 127,333 162,505
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GROSS PROFIT 277,825 344,911
OPERATING EXPENSES
General and administrative 190,016 200,351
Selling 55,818 108,451
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Total operating expenses 245,834 308,802
INCOME FROM OPERATIONS 31,991 36,109
OTHER (EXPENSE) INCOME ( 2,634) ( 173)
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NET INCOME BEFORE INCOME TAX
(EXPENSE) BENEFIT 29,357 35,936
INCOME TAX (EXPENSE) BENEFIT - -
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NET INCOME 29,357 35,936
ACCUMULATED DEFICIT -
BEGINNING OF PERIOD (1,594,543) (1,364,376)
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ACCUMULATED DEFICIT -
END OF PERIOD $(1,565,186) $(1,328,440)
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Read the accompanying notes to the financial statements.
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MED GEN, INC.
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CONDENSED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
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2000 1999
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CASH FLOWS FROM OPERATING
ACTIVITIES $ 82,475 $( 32,422)
CASH FLOWS FROM INVESTING ( 22,779) ( 19,651)
CASH FLOWS FROM FINANCING ( 5,000) 52,073
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NET INCREASE (DECREASE) IN CASH 54,696 -
CASH - BEGINNING OF PERIOD 27 -
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CASH - END OF PERIOD $ 54,723 -
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Read the accompanying notes to financial statements.
MED GEN, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
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NOTE 1. BASIS OF PRESENTATION
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The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and item
310(b) of Regulation S-B. They do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results of
operations for the periods presented are not necessarily
indicative of the results to be expected for the full
year. For further information, refer to the financial
statements of the Company as of September 30, 2000
contained in the Company's Form 10-SB.
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NOTE 2. STOCK-BASED COMPENSATION
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On December 6, 2000, the Company awarded 125,000 stock
warrants to several non-employees. The warrants granted
are to purchase common stock at not less than fair-market
value at the date of the grant and are exercisable in full
at the date of the grant. The warrants have a three-year
term and expire on December 31, 2003. Shares granted are
subject to certain restrictions on ownership and
transferability. At December 31, 2000, no warrants have
been exercised.
The Company has adopted Statement of Financial Accounting
Standards No. 123 (SFAS 123) to account for these
warrants, which recognizes compensation cost based on a
fair value method. For the three month period ending
December 31, 2000, no compensation cost was recognized in
the condensed statement of operations for these equity
awards.
NOTE 3. SUBSEQUENT EVENTS
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On January 4, 2001, the Company granted an aggregate of
470,000 restricted shares of its common stock to certain
employees and non-employees as compensation for present
and future services. Since these shares are subject to
certain restrictions on ownership and transferability,
they were issued at a discount from the prevailing market
price on that date.
The Company filed a Form S-8 with the Securities and
Exchange Commission on January 19, 2001 to register
1,500,000 shares of common stock for issuance upon the
exercise of options under the Company's Non-Qualified
Stock Option Plan, adopted January 10, 2001. In addition,
the Company registered an additional 1,550,000 shares for
issuance under various Consulting Agreements with non-
employees.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Form 10-QSB contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation
Reform Act of 1995, and which are subject to the risks and
uncertainties which could cause actual results to differ materially
from those discussed in the forward-looking statements and from
historical results of operations. Among the risks and uncertainties
which could cause such a difference, are those relating to the
Company's reliance upon suppliers, dependence upon key personnel,
its ability to manage growth, the impact of economic conditions
generally and in the nutrition and healthy lifestyle industries in
particular, product demand, market competition, risk inherent in the
Company's operations and other unknown factors. Further information
is contained in the Company's Form 10-KSB for the fiscal year ended
September 30, 2000, as filed with the SEC.
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RESULTS OF OPERATIONS
Three months ended December 31, 2000 compared to three months ended
December 31, 1999.
For the 2001 fiscal first quarter ended December 31, 2000, revenues
decreased to $405,158 from $507,416 in the comparable year ago
quarter. This decrease in revenues was the result of no direct
Informercial advertising by the Company in the current quarter. In
addition, the residual effects of the Passion For Life lawsuit in
the United Kingdom had a disruptive effect on order flow, resulting
in a negative comparison for the current quarter, although future
comparisons will be positive now that a new United Kingdom
distributor is in place. (Please refer to the Company's 10-KSB for
the fiscal year ended September 30, 2000 for additional information
about the Passion For Life legal action).
Gross profit was $277,825 in the current quarter against $344,911 a
year ago and gross profit margins remained unchanged at about 68%.
Operating expenses decreased to $235,834 from $308,802 in the year
ago quarter, with the expense margin also remaining unchanged at
about 61% for each period. The Company's goal is to increase gross
profit margins to 75%, while at the same time reducing expenses as a
percentage of sales to less than 50%. Management believes that such
gross profit and expense margin levels will be attained by the end
of the current fiscal year through reduced production costs and
lower stocking and entry fees as a percentage of sales in the retail
market, respectively.
The Company reported net income in the current quarter of $29,357
verses net income in the year ago quarter of $35,936. Management
anticipates that the Company will remain profitable from increased
sales in the domestic retail market, especially through major mass
retailers, and from continued expansion into overseas markets and
from opening new markets and distribution channels.
LIQUIDITY AND CAPITAL RESOURCES
Cash on hand at the end of the quarter increased by $54,696 from the
last fiscal year ended September 30, 1999. The Company paid down
$5,000 on its $50,000 available line of revolving credit during the
quarter and, therefore, has $5,000 available. In addition, Working
Capital increased by $24,595 from the last fiscal year. The Company
feels it has sufficient cash resources, receivables and cash flow to
provide for all general corporate operations in the foreseeable
future.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Med Gen Inc.
(Registrant)
Date: 2/6/01 By:/S/ Paul B. Kravitz
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Paul B. Kravitz
Chief Executive Officer
Date: 2/6/01 By:/S/ Paul S. Mitchell
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Paul S. Mitchell
President
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