SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended: June 30, 2001
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _____to______
Commission file number: 0-30629
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FIRST AID DIRECT, INC.
(Name of small business issuer in its charter)
Florida 59-1796257
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(State of incorporation) (IRS employer Ident. No.)
10211 N.W. 53rd St., Sunrise, FL 33351
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(address of principal office) (Zip Code)
Registrant's telephone number: (954) 749-9926
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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 No X
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The number of shares outstanding of each of the issuer's classes of equity
as of June 30, 2001: 3,985,000 shares of Common Stock, $.001 par value.
FIRST AID DIRECT, INC.
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Balance Sheet (Unaudited) as of June 30, 2001 Page 3
Condensed Statements of Income (Unaudited) for the six months
ended June 30, 2001 and 2000 and the three months ended
June 30, 2001 and 2000 Page 4
Condensed Statements of Cash Flows (Unaudited) for the six
months ended June 30, 2001 and 2000 Page 5
Notes to Financial Statements Page 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
FIRST AID DIRECT, INC.
CONDENSED BALANCE SHEET
JUNE 30, 2001
(UNAUDITED)
ASSETS
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Current assets:
Cash $ 37,099
Accounts receivable - stockholder 63,097
Accounts receivable 275,013
Inventories 438,726
Prepaid expenses 62,240
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Total current assets 876,175
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Property and equipment, net 64,573
Intangible asset, net 116,141
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$1,056,889
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current Liabilities:
Accounts payable and accrued expenses $ 203,089
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Total current liabilities 203,089
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Obligations under line of credit 84,000
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Stockholders' equity:
Common stock 3,985
Additional paid-in capital 1,604,127
Deficit (838,312)
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769,800
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$1,056,889
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The accompanying notes are an integral part of these condensed financial
statements.
Page 3
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
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2001 2000 2001 2000
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Net sales $1,666,496 $1,328,904 $ 814,025 $ 710,976
Cost of sales 1,205,958 937,954 602,049 517,456
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Gross margin 460,538 390,950 211,976 193,520
General and administrative expenses 434,741 322,535 201,875 166,284
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Income before income taxes 25,797 68,415 10,101 27,236
Provision for income taxes - - - -
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Net income $ 25,797 $ 68,415 $ 10,101 $ 27,236
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Net income per share information:
Basic:
Net income per share $ .01 $ .02 $ .00 $ .01
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Weighted average number of common shares 3,949,199 3,905,000 3,985,000 3,905,000
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Diluted:
Net income per share $ .01 $ .02 $ .00 $ .01
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Weighted average number of common shares 3,985,000 3,905,000 3,985,000 3,905,000
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The accompanying notes are an integral part of these condensed financial
statements.
Page 4
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
2001 2000
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Cash flows from operating activities:
Net income $ 25,797 $ 68,415
Changes in assets and liabilities 59,065 (179,275)
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Net cash provided by (used in) operating activities 84,862 (110,860)
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Cash flows from investing activities:
Acquisition of customer list (133,362)
Purchase of equipment (1,999) (675)
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Net cash used in investing activities (1,999) (134,037)
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Cash flows from financing activities:
Repayment on line of credit (54,000)
Proceeds from exercise of stock options 8,000 -
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Net cash provided by financing activities (46,000) -
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Net increase (decrease) in cash and cash equivalents 36,863 (244,897)
Cash and cash equivalents, beginning of period 236 270,839
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Cash and cash equivalents, end of period $ 37,099 $ 25,942
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Supplemental Disclosure of Cash Paid:
Interest $ 4,823 $ -
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Non-cash Investing and Financing Activities:
Assets acquired in exchange for debt $ - $ 50,000
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The accompanying notes are an integral part of these condensed financial
statements.
Page 5
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of First Aid Direct,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six month periods ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001. For further
information, refer to the financial statements and footnotes for the year ended
December 31, 2000 found in the Company's Form 10-KSB.
The fiscal years ended December 31, 2001 and December 31, 2000 are herein
referred to as "fiscal 2001" and "fiscal 2000", respectively.
2. INVENTORIES
Inventories are comprised primarily of first aid products held for sale, and are
stated at the lower of cost or market, determined on the FIFO method.
3. ACQUISITION OF ASSETS
PURCHASE
On March 17, 2000, the Company entered into an asset purchase
agreement to buy certain assets from a Company stockholder. The
Company purchased accounts receivable, inventory and customer lists
for $200,000, as noted below, to be paid in cash. The $200,000
represents cost as reflected in the accounting books and records of
the stockholder. As of December 31, 2000, the full purchase price of
$200,000 was paid.
Accounts receivable $ 25,264
Inventories 41,374
Customer listings 133,362
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$ 200,000
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COMMITMENTS
The Company entered into a non-competition agreement and a consulting
agreement with the original owner of the assets purchased above. The
covenant not to compete is for a five-year term and provides for
$25,000 each year, for a term of three years, to be paid in thirty-six
equal installments totaling $75,000. The consulting agreement is for a
three-year term and provides for thirty-six equal installments
totaling $75,000.
Page 6
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS
4. SALES TO STOCKHOLDER
During the six months ended June 30, 2001 and 2000, 31% and 22%, respectively,
of revenue was derived from sales to a stockholder.
Page 7
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES OR OTHER FACTORS,
WHICH MAY CAUSE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS TO VARY FROM THOSE PREDICATED OR IMPLIED IN THIS
REPORT. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, WITHOUT LIMITATION,
DECLINE IN DEMAND FOR THE COMPANY'S PRODUCTS OR SERVICES, AND THE EFFECT OF
GENERAL ECONOMIC CONDITIONS AND FACTORS AFFECTING THE WHOLESALE DISTRIBUTION
INDUSTRY. FURTHER INFORMATION ON THE FACTORS AND RISKS THAT COULD AFFECT FIRST
AID DIRECT'S BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARE
INCLUDED UNDER THE "RISK FACTORS" SECTIONS OF FIRST AID DIRECT'S PUBLIC FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULT OF OPERATIONS
Three months ended June 30, 2001 compared to the three months ended June 30,
2000.
Sales Total revenue increased 14% in the second quarter of fiscal 2001 over
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the same period in fiscal 2000. The revenue increased $103,049 from $710,976 to
$814,025 in the three months ended June 30, 2001 over the same period in the
prior fiscal year. Revenues increased as a result of the supplier agreement
signed with Van Dyne Crotty, Inc. for the Company to be the primary supplier for
its retail first aid distribution business, the Company acquiring a customer
list and other assets from Van Dyne Crotty, Inc. as disclosed in Note 3 to the
financial statements, and additional sales resulting from increases in sales to
new and existing distributors. The increase in sales to related parties
amounted to approximately $85,000, or 82% of the increase for the quarter.
Costs and Expenses The cost of sales for the second quarter increased
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$84,593 as a result of the increased sales from $517,456 in the second quarter
of fiscal 2000 to $602,049 in the second quarter of fiscal 2001. The overall
result was a 10% increase in the gross margin of $18,456, from $193,520 in the
second quarter of fiscal 2000 to $211,976 in the second quarter of fiscal 2001.
As a percentage, the gross margin decreased from 27% in fiscal 2000 to 26% in
fiscal 2001.
General and administrative expenses increased 21% or $35,591 from $166,284 in
the second quarter of fiscal 2000 to $201,875 in the second quarter of fiscal
2001. Also, general and administrative expenses increased slightly as a percent
of revenue from 23% in 2000 to 25% in 2001. The increase primarily resulted
from costs related to an updated catalog and an increase in the amortization and
consulting costs for the Roehampton product line, compared to the results of the
prior year.
Income before income taxes The Company's income before income taxes
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decreased $17,135 during the second quarter of fiscal 2001 to $10,101, from
$27,236 during the second quarter of fiscal 2000. The decrease was primarily a
result of the higher costs for an updated catalog and the amortization and
consulting costs related to the Roehampton product line added during 2000.
Other. No income tax expense or benefit is recorded in the three-month periods
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ended June 30, 2001 and 2000, as the Company will utilize net operating loss
carryforwards to offset the current tax expense.
Page 8
Six months ended June 30, 2001 compared to the six months ended June 30, 2000.
Sales Total revenue increased 26% through the second quarter of fiscal 2001
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over the same period in fiscal 2000. The revenue increased $337,592 from
$1,328,904 to $1,666,496 in the six months ended June 30, 2001 over the same
period in the prior fiscal year. Revenues increased as a result of the supplier
agreement signed with Van Dyne Crotty, Inc. for the Company to be the primary
supplier for its retail first aid distribution business, the Company acquiring a
customer list and other assets from Van Dyne Crotty, Inc. as disclosed in Note 3
to the financial statements, and additional sales resulting from increases in
sales to new and existing distributors. The increase in sales to related
parties amounted to approximately $221,400, or a 76% increase over the six
months ended June 30, 2000.
Costs and Expenses The cost of sales through the second quarter increased
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$268,004 as a result of the increased sales from $937,954 for the six months of
fiscal 2000 to $1,205,958 through the second quarter of fiscal 2001. The
overall result was an 18% increase in the gross margin of $69,588, from $390,950
during the six months of fiscal 2000 to $460,538 through the second quarter of
fiscal 2001. As a percentage, the gross margin decreased from 29% in fiscal
2000 to 28% in fiscal 2001.
General and administrative expenses increased 35% or $112,206 from $322,535 for
the six months of fiscal 2000 to $434,741 for the six months of fiscal 2001.
Also, general and administrative expenses increased slightly as a percent of
revenue from 24% in 2000 to 26% in 2001. The increase primarily resulted from
costs related to an updated catalog and an increase in the amortization and
consulting costs for the Roehampton product line, compared to the results of the
prior year.
Income before income taxes The Company's income from before income taxes
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decreased $42,618 during the six months of fiscal 2001 to $25,797, from $68,415
during the six months of fiscal 2000. The decrease was primarily a result of
the higher costs for an updated catalog and the amortization and consulting
costs related to the Roehampton product line added during 2000.
Other. No income tax expense or benefit is recorded in the six-month periods
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ended June 30, 2001 and 2000, as the Company will utilize net operating loss
carryforwards to offset the current tax expense.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of the Company's cash are net cash flows from operating
activities, short-term vendor financing and a line of credit obtained from a
bank. The Company established a $250,000 line of credit with a bank that
matures in February 2003 to fund cash requirements as needed. The line requires
monthly interest payments and bears interest at the prime rate of interest (7.0%
at June 30, 2001). As of June 30, 2001, $84,000 was outstanding on the line of
credit. The line is collateralized by the Company's accounts receivable and
inventory.
The Company believes its current available cash position, coupled with its cash
forecast for the year and periods beyond, is sufficient to meet its cash needs
on both a short-term and long-term basis. The balance sheet has a strong
working capital ratio (4.31 to 1) and management is not aware of any known
trends or demands, commitments, events, or uncertainties, as they relate to
liquidity which could negatively affect the Company's ability to operate and
grow as planned.
Page 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS:
(a) Exhibits
None
(b) Reports on Form 8-K
On June 12, 2001, the Company filed a Form 8-K reporting on the change in
certifying accountants, and containing the following information:
At a meeting held on June 7, 2001, the Board of Directors of First Aid
Direct, Inc.(the "Company") approved the engagement of Margolies, Fink and
Wichrowski as independent auditors of the Company for the fiscal year ended
December 31, 2001, to replace the firm of Rachlin Cohen Holtz LLP ("RCH"),
who were dismissed as the Company's auditors, effective June 12, 2001.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST AID DIRECT, INC., A FLORIDA CORPORATION
Date: August 13, 2001 By /s/ Scott Seigel
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Scott Seigel, President and CEO
(Principal Executive Officer)