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 June 30, 2001
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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
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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
6,193,260 Shares outstanding as of June 30, 2001
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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MED GEN, INC.
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CONDENSED BALANCE SHEET
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JUNE 30, 2001
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ASSETS
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(unaudited)
CURRENT ASSETS
Cash $ 25,997
Accounts receivable, net 513,648
Miscellaneous receivables 50,875
Inventory 248,177
Prepaid expenses and other deferred charges 82,727
Officer advances 6,867
Due from related parties 141,647
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Total current assets 1,069,938
FURNITURE AND EQUIPMENT, net 43,255
INTANGIBLE AND OTHER NON-CURRENT ASSETS, net 18,089
SECURITY DEPOSITS 90,609
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TOTAL ASSETS $1,221,891
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable and accrued expenses $ 502,902
Notes payable 50,000
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Total current liabilities 552,902
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LONG-TERM DEBT 82,500
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,
6,193,260 issued and outstanding 6,193
Additional paid-in capital 2,185,751
Accumulated deficit (1,595,455)
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596,489
Less: Treasury stock,
20,000 common shares, at cost ( 10,000)
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Total stockholders' equity 586,489
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,221,891
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Read the accompanying notes to the financial statements.
3
MED GEN, INC.
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CONDENSED STATEMENTS OF OPERATIONS
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FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000
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(unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
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JUNE 30, JUNE 30,
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2001 2000 2001 2000
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NET SALES $ 845,026 $ 264,876 $ 1,612,357 $ 1,150,201
COST OF GOODS SOLD 336,965 41,193 555,101 290,080
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GROSS PROFIT 508,061 223,683 1,057,256 860,121
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OPERATING EXPENSES
General and administrative 345,380 266,434 880,067 617,174
Selling expenses 103,469 64,091 180,911 282,374
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Total operating 448,849 330,525 1,060,978 899,548
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INCOME (LOSS) FROM OPERATIONS 59,212 ( 106,842) ( 3,722) ( 39,427)
OTHER INCOME (EXPENSE) ( 7,928) ( 1,408) 2,810 ( 2,817)
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NET INCOME (LOSS) BEFORE
INCOME TAX EXPENSE 51,284 ( 108,250) ( 912) ( 42,244)
INCOME TAX EXPENSE - - - -
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NET INCOME (LOSS) $ 51,284 $( 108,250) $( 912) $( 42,244)
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BASIC NET INCOME (LOSS)
PER COMMON SHARE $ .01 $( .03) $( - ) $( .01)
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DILUTED NET INCOME (LOSS)
PER COMMON SHARE AND DILUTIVE
POTENTIAL COMMON SHARE $ .01 $( .03) $( - ) $( .01)
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WEIGHTED AVERAGE BASIC
COMMON SHARES OUTSTANDING 5,535,796 3,841,534 4,972,068 3,452,018
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WEIGHTED AVERAGE BASIC
COMMON AND DILUTIVE POTENTIAL
COMMON SHARES OUTSTANDING 5,564,807 3,841,534 4,981,739 3,452,018
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Read the accompanying notes to the financial statements.
4
MED GEN, INC.
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CONDENSED STATEMENTS OF CASH FLOWS
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FOR THE NINE MONTHS ENDED JUNE 30, 2001 AND 2000
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(unaudited)
2001 2000
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NET CASH FLOWS FROM OPERATING
ACTIVITIES $( 391,371) $( 117,164)
NET CASH FLOWS FROM INVESTING
ACTIVITIES ( 34,732) ( 31,949)
NET CASH FLOWS FROM FINANCING
ACTIVITIES 452,073 201,874
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NET INCREASE IN CASH 25,970 52,761
CASH - BEGINNING OF PERIOD 27 -
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CASH - END OF PERIOD $ 25,997 $ 52,761
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Read the accompanying notes to financial statements.
5
MED GEN, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE NINE MONTHS ENDED JUNE 30, 2001
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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.
NOTE 2. LONG-TERM DEBT
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Under the terms of a Private Placement Memorandum dated
April 17, 2001, the Company offered convertible debentures.
The debentures mature on July 31, 2002 and bear 8% annual
interest which is payable semi-annually.Each $1,000 face
value debenture is convertible, at the sole discretion of
the bondholder, into 2,000 shares of common stock.
Additionally, each $1,000 face value debenture includes
1,000 warrants which are convertible into 1,000 shares of
common stock at $1.25 per share. The warrants are
non-detachable and expire on July 31, 2004. Through
June 30, 2001, the Company received proceeds from the
sale of the debentures totaling $82,500. Subsequent to
June 30, 2001, the Company raised an additional $60,000
from the sale of the debentures bringing the total
proceeds to $142,500. The Company incurred debt issuance
costs in the amount of $48,013. The Company is no longe
offering the sale of these debentures. No amounts of the
notes or warrants were converted by bondholders through
June 30, 2001.
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MED GEN, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE NINE MONTHS ENDED JUNE 30, 2001
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NOTE 3. CAPITAL STOCK
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Under the terms of a Private Placement Memorandum dated
May 21, 2001, the Company offered equity units at a price
of $2.00 per unit for a total offering of $1,000,000. A
unit consists of six shares of common stock, one Class A
warrant and one Class B warrant. The Class A warrant is
convertible into one share of common stock at $1.25. The
Class B warrant is convertible into one share of common
stock at $2.50. Both warrants are non-detachable and
expire on July 31, 2004. Through June 30, 2001, the
Company has issued 323,550 shares with 53,925 Class A
warrants and 53,925 Class B warrants attached. Proceeds
through June 30, 2001 totaled $71,512 net of $36,338 in
stock offering costs. No warrants were converted by these
shareholders through June 30, 2001.
On June 5, 2001, the Company issued 170,000 shares of
common stock to various unrelated parties in satisfaction
of certain liabilities. Every two shares of common stock
include a non-detachable warrant which is convertible into
one additional share of common stock at $1.00 per share.
The warrants expire July 31, 2004. No warrants were
converted by these shareholders through June 30, 2001.
During June 2001, 500,000 options were exercised for
$25,000.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Three months ended March 31, 2001 compared to three months ended
March 31, 2000
RESULTS OF OPERATIONS
For the 2001 fiscal third quarter ended June 30, 2001, Sales more
than tripled to $845,026 from $264,876 for an increase of 219%.
Gross Profit was $$508,061 in the current quarter against $223,683
in the comparable year ago quarter. Gross Margins declined to 60%
from 85% reflecting changes in the sales mix and increases in
product costs during the quarter.
Operating expenses increased by 35% from $330,525 to $448,849
resulting in an Expense Margin of 53% in the current quarter versus
an Expense Margin of 125% in the comparable year ago quarter. The
Company reported net income in the current quarter of $51,284 versus
a loss of $108,250 in the year ago quarter. Management anticipates
continuing profitability due to increased sales to the domestic
market and ramping up its other product lines through the same
distribution network.
LIQUIDITY AND CAPITAL RESOURCES
Cash on hand at the end of the quarter decreased by $6,045 from the
quarter ended March 31, 2001. Working capital increased by $288,510
in the current quarter to $517,036 from $228,526 on March 31, 2001.
The Company feels it has sufficient cash resources, receivables and
cash flowto 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: August 9, 2001 By:__/s/Paul B. Kravitz_______
----------------- Paul B. Kravitz
Chief Executive Officer
Date: August 9, 2001 By:__/s/Paul S. Mitchell______
----------------- Paul S. Mitchell
President
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