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, 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 [ ]
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
10,308,906 Shares outstanding as of December 31, 2001
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.
Balance Sheet
December 31, 2001
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 76,943
Accounts receivable, net 589,776
Subscription receivable 27,457
Inventory 239,559
Officer advances 73,187
Other current assets 27,823
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Total Current Assets 1,034,745
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Property and Equipment, net 74,611
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Other Assets
Deposits 87,110
Other 72,534
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$ 1,269,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 535,972
Loans payable 100,000
Notes payable 450,000
Convertible debentures 159,500
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Total Current Liabilities 1,245,472
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Stockholders' Equity
Preferred stock, $.001 par value, 5,000,000 shares
authorized, none issued or outstanding -
Common stock, $.001 par value, 20,000,000
shares authorized, 10,308,906 shares
issued and outstanding 10,308
Paid in capital 3,339,374
Accumulated deficit (3,316,154)
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33,528
Treasury stock, at cost 20,000 shares (10,000)
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23,528
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$ 1,269,000
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See accompanying notes to the financial statements.
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Med Gen, Inc.
Statements of Operations
For the Three Months Ended December 31, 2001 and 2000
(Unaudited)
2001 2000
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Net Sales $ 952,879 $ 405,158
Cost of Sales 271,032 127,333
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681,847 277,825
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Operating expenses:
Non cash stock compensation - 22,000
Selling, general and administrative
expenses 684,211 223,834
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684,211 245,834
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Income (loss) from operations (2,364) 31,991
Other (income) expense:
Other (income) expense (23,065) 2,634
Interest expense 17,443 -
Non cash interest expense 210,000 -
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204,378 2,634
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Net income (loss) $ (206,742) $ 29,357
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Per share information:
Weighted average shares outstanding
- basic and fully diluted 10,308,916 4,444,716
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Net income per share - basic and fully diluted $ (0.02) $ 0.01
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See accompanying notes to the financial statements.
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Med Gen, Inc.
Statements of Cash Flows
For the Three Months Ended December 31, 2001 and 2000
(Unaudited)
2001 2000
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Cash flows from operating activities:
Net cash provided by (used in) operating
activities $ (174,219) $ 82,475
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Cash flows from investing activities:
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Net cash (used in) investing activities (12,625) (22,779)
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Cash flows from financing activities:
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Net cash provided by (used in) financing
activities 255,800 (5,000)
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Net increase in cash 68,956 54,696
Beginning - cash and cash equivalents 7,987 27
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Ending - cash and cash equivalents $ 76,943 $ 54,723
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See accompanying notes to the financial statements.
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MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
(UNAUDITED)
(1) Basis Of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for
interim financial information and Item 310(b) of Regulation
S-B. They do not include all of the information and footnotes required
by GAAP 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, 2001 and for the two years then ended, including notes
thereto included in the Company's Form 10-KSB.
(2) Earnings Per Share
The Company calculates net income (loss) per share as required by SFAS
No. 128, "Earnings per Share." Basic earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number
of common shares outstanding for the period. Diluted earnings (loss) per
share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods when anti-dilutive, commons stock
equivalents are not considered in the computation.
(3) Inventory
Inventory is stated at the lower of cost, determined on a first in,
first out basis, or market value. Inventory consists principally of
finished goods and packaging materials.
(4) Impairment of Long Lived Assets
Long lived assets and certain identifiable intangibles held and used by
the Company are reviewed for possible impairment whenever events or
circumstances indicate the carrying amount of an asset may not be
recoverable or is impaired. Management has not identified any impairment
losses as of December 31, 2001.
(5) Notes Payable
During October 2001 the Company refinanced certain loans into a $350,000
note payable due January 23, 2002 with interest at 7.5% per annum. As
additional consideration for the loan, the Company issued 1,500,000
shares of its common stock (see Note 7).
(6) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes",
which requires use of the liability method. FAS 109 provides that
deferred tax assets and liabilities are recorded based on the
differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes, referred to as
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MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
(UNAUDITED)
(6) Income Taxes (Contd.)
temporary differences. Deferred tax assets and liabilities at the end of
each period are determined using the currently enacted tax rates applied
to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled, or realized.
The Company's deferred tax asset resulting from net operating loss
carryforwards is fully offset by a valuation allowance. The Company has
recorded a valuation allowance to state its deferred tax assets at
estimated net realizable value due to the uncertainty related to
realization of this asset through future taxable income.
The provision for income taxes differs from the amount computed by
applying the statutory rate of 34% to income before income taxes due to
the effect of the net operating loss.
(7) Stockholders' Equity
During October 2001 the Company issued 735,000 shares of common stock
for non cash consideration aggregating $147,000, pursuant to the
exercise of stock options by a consultant.
During October 2001 the Company issued 1,500,000 shares of common stock
as partial consideration for a loan (see Note 5). The Company charged
the fair value of these shares of $210,000 to interest expene during the
period ended December 31, 2001.
(8) Concentrations
During the period ended December 31, 2001 the Company derived 50% and
23% of its total sales from two major customers.
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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 December 31, 2001
compared with three months ended December 31, 2000
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Results of Operations
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For the 2002 first fiscal quarter ended December 31, 2001, Sales
increased 135% to $952,879. Gross Profit for the first quarter was
$681, 847 versus $277,825 for the year ago quarter, an increase of
145%.Gross Profit Margins for the quarter increased to72% of Sales up
from 69% in the year earlier quarter reflecting manufacturing
economies on higher Sales volume.
Operating Expenses increased to $684,211 in the first quarter,
representing 72% of Sales, an increase of 178% (from $245,834 in the
year earlier quarter, and 61% of Sales). Operating Income in the first
quarter was a modest loss of $2,364 versus a year ago quarterly profit
of $31,991. For the first fiscal quarter, the Company reported a loss
of $0.02 per share versus a year ago profit of $0.01 per share.
Liquidity and Capital Resources
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Cash on Hand at the end of the quarter increased by $68,956 from the
quarter ended September 30, 2001 to $76,943. Current assets at the end
of the first fiscal quarter were $1,034,745 (versus $820,560 at
September 20, 2001). Current liabilities at the end of the first
fiscal quarter were $1,245,472. The Company believes it has
sufficient cash resources, receivables and cash flow to provide for
all general corporate operations in the foreseeable future.
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PART II - OTHER INFORMATION
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ITEM 1. - LEGAL PROCEEDINGS
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None.
ITEM 2. - CHANGES IN SECURITIES
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None.
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES
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None.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. - OTHER INFORMATION
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None.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
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There were no current reports on Form 8-K filed for the quarter
ended December 31, 2001.
A subsequent Current Report on Form 8-K reporting one item under
Item 4 - Changes in Registrant's Certifying Accountant
was filed on January 15, 2002.
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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: January 30, 2001 By: ___/s/Paul B. Kravitz_______________
Paul B. Kravitz
Chief Executive Officer
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