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, 2003
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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.)
5706 Hiatus Road Suite 500 33321
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(address of principal office) (Zip Code)
Registrant's telephone number: (954) 724-2929
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, 2003: 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, 2003
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Balance Sheet (Unaudited) as of June 30, 2003 Page 3
Condensed Statements of Income (Unaudited) for the
six months ended June 30, 2003 and 2002 and the
three months ended June 30, 2003 and 2002 Page 4
Condensed Statements of Cash Flows (Unaudited) for the
six months ended June 30, 2003 and 2002 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, 2003
(UNAUDITED)
ASSETS
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Current assets:
Cash $ 2,251
Accounts receivable 314,890
Note receivable, employee 6,000
Inventories 741,223
Prepaid expenses 96,031
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Total current assets 1,160,395
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Property and equipment, net 152,950
Intangible asset, net 109,475
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Total assets $1,422,820
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Accounts payable and accrued expenses $ 310,332
Obligations under line of credit 215,000
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Total current liabilities 525,332
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Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized;
3,985,000 issued and outstanding 3,985
Additional paid-in capital 1,604,127
Deficit (710,624)
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Total stockholders' equity 897,488
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Total liabilities and stockholders' equity $1,422,820
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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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2003 2002 2003 2002
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Net sales $1,660,905 $1,709,682 $ 866,728 $ 822,749
Cost of sales 1,152,515 1,196,085 600,584 594,511
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Gross margin 508,390 513,597 266,144 228,238
General and administrative expenses 579,288 408,969 280,330 204,308
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Income before income taxes (70,898) 104,628 (14,186) 23,930
Provision for income taxes - - - -
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Net income $ (70,898) $ 104,628 $ (14,186) $ 23,930
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Net income per share information:
Basic:
Net income per share $ (.02) $ .03 $ (.01) $ .01
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Weighted average number of common shares 3,985,000 3,985,000 3,985,000 3,985,000
=========== ========== =========== ==========
Diluted:
Net income per share $ (.02) $ .03 $ (.01) $ .01
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Weighted average number of common shares 3,985,000 3,985,000 3,985,000 3,985,000
=========== ========== =========== ==========
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,
2003 2002
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Cash flows from operating activities:
Net income (loss) $ (70,898) $ 104,628
Depreciation 16,693 10,443
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Changes in assets and liabilities (123,359) (260,463)
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Net cash used in operating activities (177,564) (145,392)
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Cash flows from investing activities:
Purchase of equipment (41,256) (13,684)
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Net cash used in investing activities (41,256) (13,684)
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Cash flows from financing activities:
Borrowings on line of credit 215,000 45,000
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Net cash provided by (used for) financing activities 215,000 45,000
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Net increase (decrease) in cash and cash equivalents (3,820) (114,076)
Cash and cash equivalents, beginning of period 6,071 123,297
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Cash and cash equivalents, end of period $ 2,251 $ 9,221
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Supplemental Disclosure of Cash Paid:
Interest $ 3,212 $ -
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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, 2003 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2003. For further
information, refer to the financial statements and footnotes for the year ended
December 31, 2002 found in the Company's Form 10-KSB.
The fiscal years ended December 31, 2003 and December 31, 2002 are herein
referred to as "fiscal 2003" and "fiscal 2002", 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. SALES TO STOCKHOLDER
During the six months ended June 30, 2003 and 2002, 32% and 33%, respectively,
of revenue was derived from sales to a stockholder.
Page 6
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, 2003 compared to the three months ended June 30,
2002.
Sales Total revenue increased 5% or $43,979 in the second quarter from
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$822,749 in fiscal 2002 to $866,728 in the three months ended June 30, 2003.
The increase in sales resulted primarily from sales to new distributors.
Costs and Expenses The cost of sales for the second quarter increased $6,073
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from $594,511 in the second quarter of fiscal 2002 to $600,584 in the second
quarter of fiscal 2003. When combined with the increase in net sales, the
result was a 17% increase in the gross profit of $37,906, from $228,238 in the
second quarter of fiscal 2002 to $266,144 in the second quarter of fiscal 2003.
As a percentage, the gross margin increased from 28% in fiscal 2002 to 31% in
fiscal 2003. The improvement in gross margin results from the Company's
decision to acquire more bulk product and assemble it into finished goods rather
than purchase finished goods for sale. The cost of the bulk product coupled
with the cost to assemble it resulted in lower cost of goods sold.
General and administrative expenses increased 37% or $76,022 from $204,308 in
the second quarter of fiscal 2002 to $280,330 in the second quarter of fiscal
2003. Also, general and administrative expenses increased as a percent of
revenue from 25% for the quarter ended June 30, 2002 to 32% for the quarter
ended June 30, 2003. The increase in general and administrative expenses is
directly attributable to the Company's decision to develop a new product line -
Total First Aid - which will enable the Company to effectively penetrate new
market segments.
Income before income taxes The Company's income before income taxes
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decreased $38,116 from a profit of $23,930 for the quarter ended June 30, 2002
to a (loss) of $14,186 during the second quarter of fiscal 2003. The decrease
results from the increase in general and administrative costs.
Other. No income tax expense or benefit is recorded in the three-month periods
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ended June 30, 2003 and 2002.
Page 7
Six months ended June 30, 2003 compared to the six months ended June 30, 2002.
Sales Total revenue decreased 3% through the second quarter of fiscal 2003
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over the same period in fiscal 2002. The revenues decreased $48,777 from
$1,709,682 to 1,660,905 in the six months ended June 30, 2003 over the same
period in the prior fiscal year. The decrease in sales resulted primarily from
decreases in sales to existing distributors.
Costs and Expenses The cost of sales through the second quarter decreased
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$43,570 from $1,196,085 for the six months of fiscal 2002 to $1,152,515 for the
six months of fiscal 2003. When combined with the decrease in net sales, the
result was a 1% decrease in the gross profit of $5,207 from $513,597 for the six
months of fiscal 2002 to $508,390 for the six months of fiscal 2003. As a
percentage, the gross margin increased from 30% in fiscal 2002 to 31% in fiscal
2003. The improvement in gross margin results from the Company's decision to
acquire more bulk product and assemble it into finished goods rather than
purchase finished goods for sale. The cost of the bulk product coupled with the
cost to assemble it resulted in lower cost of goods sold.
General and administrative expenses increased 42% or $170,319 from $408,969 for
the six months of fiscal 2002 to $579,288 for the six months of fiscal 2003.
Also, general and administrative expenses increased as a percent of revenue from
24% in 2002 to 35% in 2003. The increase in general and administrative expenses
is primarily attributable to the Company's decision to develop a new product
line - Total First Aid - which will enable the Company to effectively penetrate
new market segments.
Income before income taxes The Company incurred a loss of $70,898 before
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income taxes for the six months ended June 30, 2003 as compared with a profit of
$104,628 for fiscal 2002. This resulted in a negative swing of $175,526 which
is directly attributable to the increase in general and administrative expenses.
Other. No income tax expense or benefit is recorded in the six-month periods
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ended June 30, 2003 and 2002.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of the Company's liquidity is from a line of credit obtained
from a bank. The Company established, in May 2001 a $250,000 line of credit with
a bank that matures in February 2004. The line requires monthly interest
payments and bears interest at the prime rate of interest (4.25% at June 30,
2003). As of June 30, 2003, there was $215,000 outstanding on the line of
credit. The line is collateralized by the Company's accounts receivable and
inventory. We cannot assure you that this credit facility will be renewed at
maturity.
Declining sales and increased expenses have had a negative impact on the
Company's cash position. This is evidenced by the decrease in working capital
from 4.58 to 1 (December 31, 2002) to 2.21 to 1 (June 30, 2003). The Company
has already addressed expenses by reducing Company payroll, and has reduced
rental obligations on old leases by 50%. The Company is developing additional
product lines that will enable it to open new market segments and attain
additional avenues of distribution. It is, however, apparent that a continued
decline in sales coupled with rising costs will significantly impact the
Company's ability to operate and grow as planned.
Page 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS:
(a) Exhibits furnished
99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
None
Page 9
CERTIFCATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d)
AS REQUIRED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Siegel, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of first Aid Direct,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 15, 2003 /s/ Scott Siegel
Scott Siegel
Chief Executive Officer
CERTIFCATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d)
AS REQUIRED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey N. Tabin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of first Aid Direct,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 15, 2003 /s/ Jeffrey N. Tabin
Jeffrey N. Tabin
Controller
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: July 15, 2003 By /s/ Scott Siegel
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Scott Siegel, President and CEO
(Principal Executive Officer)